USD/JPY hits 4-week low

• USD/JPY plunges on falling US yields.
• The Credit Suisse crisis shakes the markets and supports safe-haven stocks.

He USD/JPY It sank to 4-week lows on Wednesday as US and European yields fell as the European Banking Index fell, which posted its biggest one-day drop in nearly 13 months. Credit Suisse released its 2022 annual report on Tuesday, citing “material weaknesses” in its internal controls over financial reporting and noting that it had yet to curb customer outflows. This has caused a flight to safety in financial markets, massaging USD/JPY lower.

As of this writing, USD/JPY has lost more than 0.7%, but is far from the daily low of 132.21. The currency pair fell from a high of 135.11 in the European session and has returned to trading around 133.30 at the time of writing. Two-year Treasury yields have fallen 98 basis points in the past five days, the biggest drop since Black Monday week of Oct. 19, 1987.

Markets are pricing in an 80% chance of a 25 basis point Federal Reserve rate hike next week. Investors also value the possibility of no change at 50%. Elsewhere, December Fed funds futures, which reflect the overnight rate banks use to lend to each other, have fallen to 3.62% in a sign the market expects the Fed to cut rates. interest rates at the end of the year, if not before.

USD/JPY weekly chart

Price is finding a zone of potential support in this correction at the 61.8% Fibonacci retracement of price momentum up. An uptrend could be initiated if a bullish structure emerges on the lower time frame over the course of the next few sessions and/or days.