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  • Yen remains demanded amid lower global yields and lack of strength in equity markets. 
  • USD/JPY holds negative technical outlook, fails above 108.00.

The USD/JPY pair erased gains and dropped back toward the 107.50 area as US yields remain near record lows and after the recovery in equity prices lost steam. 

US data offers no help 

Manufacturing data from the US was mostly ignored by market participants, who are paying more attention to recent market developments. The Markit Manufacturing PMI fell to 50.7 in February against the 50.8 reading expected while the ISM Manufacturing dropped to 50.1 below the 50.4 of market consensus. 

Prices continue to discount rate cuts from the Federal Reserve in the short-term. The question appears to be about when and how much. The 10-year yield hit a new record low at 1.04% and holds near the lows, weakening further USD/JPY. In Wall Street, after suffering the worst week in years, the Dow Jones is up 0.95% and the Nasdaq 0.52%, but modestly off highs. 

High levels of volatility should likely continue in the short-term in the currency market where the US dollar today is posting mix results. The DXY is falling for the third day in a row, at fresh one month lows. The dollar gains versus emerging market currencies that continue under pressure amid risk aversion. 

USD/JPY Technical outlook 

Earlier today USD/JPY rose to 108.50, but it then pulled back under 108.00 showing that the negative bias is still present. A consolation on top of 108.00 could remove some of the short-term bearish pressure. Above the next resistance might be seen at 108.45 and 109.00. 

On the flip side, today’s low at 107.34 (lowest in near five months) is the immediate support followed by 107.00 and 106.70.