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  • 10-year US T-bond yield drops more than 2% on Thursday.
  • Participants are waiting for headlines surrounding the U.S.-China trade dispute.
  • US Dollar Index breaks below 97.50.

The USD/JPY pair came under a renewed bearish pressure in the second half of the day as investors continued to move toward safer assets such as the JPY. After touching its lowest level since early February at 109.47, the pair is now trying to consolidate its losses and was last seen trading at 109.52, losing nearly 60 pips on the day.

Ahead of the high-level talks between American and Chinese officials in Washington today, the spokesperson for China’s Ministry of Commerce said that China, in response to a tariff hike by the U.S.,  will safeguard its legitimate rights and interests, contradicting with President Trump’s tweets from yesterday claiming that Chinese Vice-Premier was coming to Washington to make a deal.  

Although it’s still unclear whether today’s trade negotiations lead to an escalation in the trade war, investors don’t seem to be taking any chances with risk-sensitive assets. The CBOE Volatility Index, so-called Wall Street’s fear gauge, rose more than 20% to reach its highest level since January to confirm the risk-averse environment. Additionally, the 10-year T-bond yield fell below the 3-month T-bond yield for the first time since March to weigh on the greenback.

After moving in a relatively narrow band near 97.50 during the first half of the week, the US Dollar Index lost its traction today and was last down 0.25% on the day at 97.35.

On Friday, the inflation report from the United States could be the next catalyst. Until then, the market’s risk perception is likely to continue to impact the pair’s price action.

Technical levels