USD/JPY falls below 135.00 after weaker-than-expected US data

• USD/JPY falls almost two hundred pips on Thursday.
• US S&P Global PMI falls to monthly lows
• US yields plummet as recession fears mount.

The USD/JPY continued to fall after the release of US economic data and bottomed at 134.21, reaching the lowest level in six days. Bonds are rising around the world, supporting the Japanese yen.

The pair then rallied slightly and is trading around 134.60/70, down more than 200 pips from Wednesday’s multi-year high. Below 134.40, the next support lies at 133.80.

Yen advances as growth outlook worsens
Early on Thursday, Eurozone PMIs came in below expectations, sparking a rally in European bonds and helping the yen. More recently, the US S&P Global PMI also showed a significant decline in activity. Both the manufacturing and services sector figures fell to the lowest level in months: 52.4 (consensus: 56) and 51.6 (53.5), respectively. Despite the worrying data, Wall Street is higher, with the Nasdaq up 1.25% and the S&P 500 up 0.63%.

The report raised concerns about the economy and weighed on expectations for monetary policy. 10-year US Treasury yields fell to 3.00%, the lowest level in two weeks; Just on Friday, it was trading close to 3.50%, while the 30-year yield fell as low as 3.15%.

The United States lost momentum across the board following the report. DXY erased daily gains and pulled back to 104.20/30. Dollar’s losses against the yen are offset by EUR/USD’s decline as German bunds have their best day in years.

Fed Chairman Powell returns to testify in Congress. Regarding concerns about the economic outlook, he mentioned that it is possible to have a strong labor market while curbing inflation. The Fed’s Bowman said another 75 basis point rate hike would be appropriate in July.

Technical levels