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  • 10-year US T-bond yield drops more than 1% on Tuesday.
  • US Dollar Index climbs higher above 97.50.
  • US stocks post heavy losses in early trade.

The USD/JPY pair is having a difficult time recovering its losses on Monday as the risk-averse environment helps the JPY find demand as a safe-haven and outperform the greenback. As of writing, the pair is down 0.17% on the day at 110.57.

Although the pair rose toward the 111 handle on Monday on the back of reports revealing that Chinese officials, including Vice-Premier Liu He, were still set to travel to Washington for the next round of trade talks despite the U.S. President Trump’s threat to ramp up the tariff rate to 25%. However, the lack of any further positive developments and the escalating geopolitical tensions in the middle-east forced investors to stay away from risk-sensitive assets.  

Reflecting the risk-off mood, the 10-year Treasury bond yield lost more than 1% and major equity indexes in the U.S. started the day deep in the negative territory. At the moment, both the Dow Jones Industrial Average and the S&P 500 are down 0.75% on a daily basis.

Meanwhile, the US Dollar Index, which measures the dollar’s value against a basket of six major currencies, gained traction in the last couple of hours and rose to 97.70 area to make it difficult for the pair to extend its slide. In the absence of significant macroeconomic data releases in the remainder of the day, the pair’s price action is likely to be dominated by the market’s risk perception.

Technical levels to watch for