USD/JPY hits fresh five-month lows as Dow Jones tumbles 2%

• US dollar remains under pressure against majors as US yields continue to slide. 
• Wednesday’s optimism fades, European markets and Wall Street post significant losses. 
• US Sen. Elizabeth Warren is ending her presidential bid.

The USD/JPY pair dropped to 106.59, reaching the lowest level since October 3. It remains near the lows with the bearish tone intact, amid lower US yields and risk aversion. 

DXY testing monthly lows 

The greenback is falling against major but is holding firm versus commodity and emerging market currencies. While risk aversion weighs on riskier assets, lower US yields favour currencies like JPY, EUR and even today, GBP versus the USD. 

The US Dollar Index (DXY) dropped to 96.91, reaching the lowest level in almost two months.  Wednesday’s recovery was short-lived, and it is back under pressure. The 10-year yield recently hit a new record low at 0.927%. Risk aversion and expectation about more rate cut from the Federal Reserve fuels the rally in Treasuries. 

Market participants mostly ignored data from the US. Initial jobless claims rose in line with expectations while Factory Orders in January declined by 0.5% (against the -0.1% reading expected). The critical report of the week will be released on Friday: the Non-farm payroll report. 

In Wall Street, the Dow Jones is losing 2%, off lows now. In Europe, main indexes are about to close with declines of around 1.60% on average. The slide in stocks is helping the yen, that is among the top performers. 

Technical levels