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  • USD/JPY has erased losses, but so far gains have remained elusive. 
  • The upside is likely being capped by the losses in the S&P 500 futures.

USD/JPY’s recovery from session lows could be short-lived, as the US equity index futures are now flashing red.

Dip demand

The pair’s retreat from the nine-month high of 111.59 reached during the US trading hours ran out of steam near 111.11 three hours ago. 

The buyers stepped in lifting the pair back to 111.50, possibly tracking the uptick in the US equity index futures. The S&P 500 futures were up by almost 0.25% in early Asia. 

The bid tone around, however, has weakened in the last few minutes despite China delivering an interest rate cut as expected. At press time, the futures are shedding 0.25%. 

Further, the US 10-year yield is also reporting a two basis point drop at 1.55%. 

As a result, the anti-risk yen could again catch a bid wave, pushing USD/JPY down to 111.11. Currently, the pair is hovering near 111.35. 

It’s worth noting that the Shanghai Composite index is currently adding 0.4%. If the positive action in the Chinese stocks feeds into the US index futures, the USD/JPY pair could print fresh multi-month highs above 111.59. 

Technical levels