• A fresh wave of global risk-on trade/follow-through USD weakness prompts aggressive selling.
• The ongoing slide in the US bond yields/yield curve inversion adds to the USD bearish pressure.
• Mnuchin/Kudlow’s positive trade-related comments do little to provide any meaningful impetus.
The USD/JPY pair remained heavily offered through the early North-American session, albeit has managed to rebound around 10-20 pips from over one-week lows.
With investors looking past the latest optimism over the US-China trade truce, a fresh wave of global risk-aversion trade underpinned the Japanese Yen’s safe-haven demand and prompted some aggressive selling.
Adding to this, a sharp fall in the US Treasury bond yields exerted some additional downward pressure on the already weaker US Dollar and further collaborated to the pair’s steep intraday decline of over 90-pips.
Yields on the benchmark 10-year US Treasuries, dropped further below the 3% level, touching the lowest level since mid-September, while the curve between 2-year and 3-year notes inverted for the first time since 2007.
This against the backdrop of an already inverted yield curve between 2-year and 5-year notes failed to ease the prevalent USD selling bias, though oversold conditions on intraday charts helped limit further losses.
In absence of any major market moving economic releases, broader market risk sentiment and the USD/US bond yield dynamics might continue to act as key determinants of the pair’s momentum through the US trading session.
Technical levels to watch
Immediate support is pegged near the 112.65 level, below which the downfall could further get extended towards the 112.30 region en-route the 112.00 round figure mark. On the flip side, the 113.00 handle now seems to act as an immediate resistance, which if cleared might trigger a short-covering bounce towards the 113.45-50 horizontal zone.