USD/JPY near two-month lows below 131.00 level

  • USD/JPY continues to lose ground for the fifth day in a row and falls to an almost two-month low.
  • The narrowing of the yield spread between the US and Japan, along with the cautious sentiment, benefits the JPY and puts pressure on the pair.
  • A modest bounce in the USD from its lowest level since July 5 offers support for the pair, at least for now.

The pair USD/JPY extends its decline for the fifth consecutive day and falls to almost two-month lows on Tuesday. However, the pair finds some support ahead of the 100-day SMA and bounces back slightly towards the 131.00 level at the start of the European session.

Despite the more dovish stance taken by the Bank of Japan, the recent compression in global yields makes the Japanese yen more attractive. It should be remembered that The Federal Reserve hinted last week that it might slow the pace of its rate-hike campaign. sometime. In addition, the advance report of the US GDP, published last Thursday, confirmed the existence of a technical recession and fueled speculation that the Fed would not raise rates as aggressively as it was estimated This, in turn, drags the yield on the benchmark 10-year US government bond to its lowest level since April. In contrast, Japanese government bond yields are not moving due to the Bank of Japan’s yield curve control policy.

Apart of this, a weaker risk tone overall is also fueling some safe-haven money flows into the JPY, which turns out to be a key factor putting downward pressure on the USD/JPY pair. Market sentiment remains fragile amid growing concern over a global economic downturn. In addition, nervousness over the fallout from US House Speaker Nancy Pelosi’s imminent visit to Taiwan further dampens investors’ appetite for riskier assets. That said, a modest dollar rebound from its lowest level since July 5 offers some support for the pair. However, the fundamental background suggests that any significant recovery attempts risk fading quickly.

Therefore, a strong buying follow-up is needed to confirm that the USD/JPY pair has formed a short-term bottom. On the contrary, bears could expect a sustained break below the 100-day SMA support, currently around the 130.20 zone, before positioning yourself for any further depreciation moves. Market participants are now awaiting the publication of job offers from the US JOLTS. This, coupled with US bond yields, will influence dollar price dynamics and provide some momentum to the USD/JPY pair. Traders will continue to benchmark broad market risk sentiment to take advantage of short-term opportunities, though attention remains focused on Friday’s US monthly NFP employment report.

USD/JPY technical levels

USD/JPY

Overview
last price today 130.81
daily change today -0.80
Today Daily variation % -0.61
Daily opening today 131.61
Trends
daily SMA20 136.51
daily SMA50 134.34
daily SMA100 130.11
daily SMA200 122.36
levels
Previous daily high 133.56
Previous Daily Low 131.6
Previous Weekly High 137.46
Previous Weekly Low 132.5
Previous Monthly High 139.39
Previous Monthly Low 132.5
Daily Fibonacci of 38.2%. 132.35
Daily Fibonacci of 61.8% 132.81
Daily Pivot Point S1 130.95
Daily Pivot Point S2 130.3
Daily Pivot Point S3 128.99
Daily Pivot Point R1 132.91
Daily Pivot Point R2 134.22
Daily Pivot Point R3 134.87

Source: Fx Street

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