- Strong decline in European stock markets for fear of conflict between Ukraine and Russia.
- USD/JPY contained for now at 115.00, with negative bias.
The USD/JPY falls for the second day in a row and continues to decline after failing to break above January’s peak at the 116.35 area. The pair is testing the 115.00 area, where it is today’s and Friday’s low. The combination of risk aversion and falling Treasury yields favor the yen.
Equity markets fall
In Europe the main stock markets are falling more than 3%. futures of wall street point to a red open with a 1% Nasdaq decline. Fears of a Russian invasion of Ukraine are being the key factor behind the deterioration in investor sentiment.
The climate of risk aversion is boosting the dollar in the market, but even more so the yen. The Japanese currency remains the main safe haven among currencies, helping to trim some of the recent rally against the dollar.
The USD/JPY had reached as high as 116.34 last Thursday, but on Friday, it staged a sharp pullback, taking it as low as 115.00. At the start of the week, the pair reached as high as 115.60, but turned bearish again and retested the support at 115.00, which is still holding for now. A break below 115.00 would further deteriorate the outlook for USD/JPY. The next support is at 114.75 followed by 114.45.
The USD/JPY rally had been trailed by a rise in Treasury yields. But the fear in the markets increased the demand for safe-haven assets and therefore US bonds. The 10-year rate fell to 1.90%, the minimum in one week, and the 30-year rate fell to 2.11%.
Technical levels
Source: Fx Street
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