USD/JPY falls sharply and tests levels below 147.00

• The yen goes from being the worst on Monday to the best on Tuesday.
• Treasury bond yields fall.
• USD/JPY is down more than 150 pips so far today.

The USD/JPY is falling significantly on Tuesday, erasing Monday’s gains and part of Friday’s. This occurs in the face of a general weakening of the dollar on the day of the opening of the FOMC meeting and a decline in Treasury bond yields. The pair fell as low as 146.97, the lowest level since Friday.

The Dollar Index (DXY) is down 0.69% on Monday. For its part, the yield on the US 10-year bond is below 4.00%, and the two-year one is at 4.41%, moving away from the peak above 4.50% reached yesterday.

The round of data and key events begins in the US. Today will be the day for the ISM Manufacturing (previously the final S&G PMI Global) and jobs announcements data. The Fed meeting begins, which on Wednesday would announce a rise of 75 basic points in the interest rate. The focus on the FOMC will be on the statement and if there are signs that the next hikes will be softer. The expectation of the latter has weighed on the dollar.

In October, the Japanese authorities spent twice as much as in September to try to limit the yen’s weakness through market interventions. The USD/JPY rally, analysts warn, which is expected to continue as long as the strong divergence between the Bank of Japan and the Federal Reserve.

USD/JPY below the 20-day moving average

The pair is below the 20-day moving average again and is testing the 147.00 zone. The aforementioned average is around 147.35. Below 147.00, the next support to watch is seen at 146.10/20. The eye should then turn to 145.00, where a close below would point to further losses.

To the upside, USD/JPY failed to break above 148.85 on Monday, which has become a resistance to watch; now before that level the intermediate level of 147.75 appears. A consolidation above 149.00 could pave the way for a test of 150.00.

Technical levels