- US Dollar Index erases daily recovery gains.
- 10-year US T-bond yield gains more than 1%.
- Coming up: NY Fed President Williams and FOMC Chair Powell speeches.
After dropping to its lowest level since early January at 107.84, the USD/JPY pair staged a technical recovery and rose to 108.18 but failed to push higher amid a lack of fundamental drivers. With the greenback coming under a renewed pressure in the last hours, the pair lost its traction and erased its daily gains. As of writing, it was down 0.1% on a daily basis at 107.95.
Ahead of New York Fed President Williams and FOMC Chair Powell’s speeches, the greenback struggles to find demand as investors continue to price the expectation of a dovish shift. Yesterday, St. Louis Fed President Bullard opened the door for a possible rate cut citing trade concerns and low inflation. The US Dollar Index, which closed the day 0.4% lower on Monday following the disappointing PMI figures and Bullard remarks, rose to a session high of 97.25 but was last seen down 0.15% on the day at 97.08.
Meanwhile, after renewing its lowest level since September 2017 at 2.064%, the 10-year US-Treasury bond rose more than 1% today to help the positively-correlated USD/JPY pair limit its losses for the time being. Furthermore, the S&P 500 Futures is adding more than 0.4% currently, hinting at a positive start to the day in the major U.S. equity indexes. Although an improved market sentiment could cause the JPY to weaken against its rivals, the USD’s market valuation is likely to remain the primary driver in the second half of the day.
Key technical levels
The pair could face the initial support at 107.85 (daily low) ahead of 107.50 (Jan. 4 low) and 106.75 (Jan. 3 low). On the upside, resistances are located at 108.20 (daily high), 109 (psychological level) and 109.40 (20-DMA).
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