The Japanese yen is the only current exception to the strength of the USD and has rediscovered its traditional safe haven role. Economists at TD Securities remain focused on downside risks as the technical context for the pair continues to deteriorate and real yield spreads point to further downside potential.
JPY outperforming in a classic manifestation of risk aversion
“USD / JPY remains bearish after trading below short-term support around 109.72 tentatively set last week. While we are keeping an eye on the 110.30 / 40 pivot zone, we are more focused on downside risks for the pair. “
“The technical background for the USDJPY has deteriorated significantly and real yield spreads also point to further declines.”
“As we look further down, our initial focus is on the MTD lows and the upper part of the Ichimoku cloud. Both are clustered around the 109.55 mark. Beyond this, we believe that the cloud base (109.12) and the 108.50 area (+/-) are the next set of attractors to the downside. “