- A combination of factors dragged USD/JPY to the lowest level since October 11 on Tuesday.
- COVID-19 woes, the risk-off mood benefitted the safe-haven JPY and exerted heavy pressure.
- A steep decline in the US bond yields weighed on the USD and contributed to the downfall.
The USD/JPY pair maintained its heavily offered tone through the early North American session and was last seen trading around the 112.75-70 region, or the lowest level since October 11.
Following the previous day's two-way price moves, the USD/JPY pair met with fresh supply on Tuesday and prolonged its retracement slide from a near five-year peak, around mid-115.00s touched last week. The risk-off impulse in the markets provided a strong boost to the safe-haven Japanese yen. This, along with a broad-based US dollar weakness contributed to the pair's ongoing decline.
The global risk sentiment took a hit amid growing concerns about the potential economic fallout from the spread of the new coronavirus variant. The market worries were exacerbated further after The chief executive of drugmaker Moderna warned that existing vaccines will be much less effective at tackling Omicron than earlier strains of COVID-19.
Meanwhile, the developments surrounding the coronavirus saga pushed back market expectations about the likely timing of when the Fed would begin tightening its monetary policy. In fact, the money markets now indicate a 25 bps rate hike in September 2022 as against July 2022 already priced in. This, along with the global flight to safety, triggered a steep decline in the US Treasury bond yields.
This, in turn, weighed heavily on the greenback and was seen as another factor that aggravated the bearish pressure surrounding the USD/JPY pair. Apart from this, the downfall could further be attributed to some technical selling below the 113.00 mark. Acceptance below the mentioned handle might have already set the stage for an extension of the corrective slide.
Market participants now look forward to the US economic docket, featuring the release of Chicago PMI and the Conference Board's Consumer Confidence Index. The focus, however, will be on Fed Chair Jerome Powell's testimony before the Senate Banking Committee, which might influence the USD. This, along with the broader market risk sentiment, should provide some impetus to the USD/JPY pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.