- USD / JPY falls during the New York session, targeting 109.00
- Weakening market sentiment favors the Japanese yen as a safe haven.
- The volatility index (VIX) is at four-month highs, triggering a significant sell-off in the US equity markets.
The USD/JPY It is trading lower for the day, down 0.50%, trading at 109.36 at the time of writing.
Risk aversion weighs on USD / JPY
Global market sentiment remains pessimistic. During the day, most Asian and European indices had losses caused by concerns about a possible default by Chinese real estate giant Evergrande.
The Evergrande spill reached the US, as most stock indices are losing between 2.39% and almost 3%. The volatility index (VIX), also known as the “fear” index, hits a four-month high, standing at 27.53, increasing 31%.
The US dollar index, which tracks the performance of six pairs against the dollar, is flat for the session at 93.27. The US 10-year Treasury yield is plummeting six basis points to 1,309% weighing on the USD / JPY pair.
As no medium to high impact data was released for both countries on the day, the main driver for USD / JPY would be market sentiment and US 10-year yields.
Later in the week, on Wednesday, the Bank of Japan and the Federal Reserve will announce their monetary policy decisions.
USD / JPY Price Forecast: Technical Outlook
On the daily chart, USD / JPY is trading below the shorter time frame moving averages, suggesting that the pair is under selling pressure. A daily close below 109.50 could pave the way for further losses. The first support level on the downside would be 109.00. In the event of a breach of the latter, the USD / JPY bears could push the price to the August 4 low at 108.71. A crucial break out of that support would expose the 200-day moving average (DMA) at 108.11.
On the other hand, a daily close above the confluence of the 50 and 100 DMA around 109.85-90 could expose 110.00. If it breaks above 110.00, the bulls could push USD / JPY towards the August 11 high of 110.79.
The Relative Strength Index is at 43.43, slightly lower, favoring the USD / JPY bears.
Technical levels
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