- USD/JPY came under intense selling pressure in reaction to escalating geopolitical tensions.
- The Russian invasion of Ukraine fueled risk aversion and put downward pressure on the pair.
- A drop in US bond yields further inspired the bears and added to the pair’s selling bias.
The pair USD/JPY continued to lose ground during the Asian session on Thursday and fell to a fresh three-week low around the 114.40 region, pressured downward by risk aversion in the markets. At time of writing, the pair recovers slightly towards 114.75, still down -0.20% on the day
The pair met with aggressive sales during the first part of Thursday and broke its consolidation phase of the previous day amid worsening situation in Ukraine. The Russian President, Vladimir Putin authorized a special military operation in Donbas, while NATO confirmed an official invasion of Ukraine. This triggered a massive sell-off in global stock markets, What Drives Safe Haven Japanese Yen Demand and put strong downward pressure on the USD/JPY pair.
In the latest developments, the news indicated that Russian forces are attacking the Ukrainian border around Belarus. In addition, the Ukrainian border guards said that an attack is also coming from Crimea. The president of United States, Joe Biden called the attack unprovoked and unjustified and added that the United States and its allies will impose severe sanctions on Russia.. This fueled concerns about a further escalation of tensions between Russia and the West, which kept investors on edge and supported the safe-haven JPY.
The pair’s bears took further indications of a sharp drop in US Treasury bond yields, although a sharp rebound in US dollar demand could help limit losses for the USD/JPY pair, at least for now. The conflict between Russia and Ukraine seemed to have dashed hopes of a more aggressive Fed response to combat stubbornly high inflation. This, coupled with the global flight to the safe haven, dragged US bond yields lower and further contributed to the selling tone surrounding the USD/JPY pair.
With the latest drop, the pair has approached the support of the 100-day SMA, currently around the region of 114.30. It is closely followed by the monthly minimum, around the 114.15 and the round level of 114.00. A convincing break below this latest level will set the stage for a further short-term move lower for the USD/JPY pair. Investors are now waiting for the US GDP release to gain some momentum, although the key focus will remain on geopolitical developments.
USD/JPY technical levels
Source: Fx Street
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