- Yen gains momentum amid risk aversion.
- USD/JPY holds negative tone amid a decline in US yields.
The USD/JPY pair dropped from the fresh daily high at 111.85 to the lowest level since last Friday at 111.51. As of writing, it is trading near the low with the negative tone intact.
Despite the rally of the US Dollar across the board, USD/JPY turned to the downside on the back of the decline in equity prices and lower US yields. The 10-year yield fell to 2.65%, approaching to the critical support around 2.62% (February low).
Volatility in the currency market soared after the ECB meeting. The central bank decided to leave the interest rates unchanged as expected, changed its forward guidance on interest rates and also announced a new TLTRO round. The staff slashed growth and inflation forecasts for 2019 and 2020. During the press conference, the greenback turned higher while the yen extended gains across the board.
The demand for the yen is being favored by risk aversion. Emerging market currencies are falling sharply while at the same time the Dow Jones is down 0.95% and the Nasdaq 0.90%.
USD/JPY Levels to watch
The pair continues to move within a descendant channel in the very short-term with price close to the bottom that stands at 111.50. The immediate support then is seen around 111.50, followed by 111.20 and 110.90. On the upside resistance levels might be located at 111.80, 112.00 and 112.20/25 (Dec 6 & 7 low).