- USD/JPY dropped from 108.20 to hold at 108 the figure overnight and was heavy into Asia.
- USD/JPY is back below converging moving averages on 4HR timeframe.
USD/JPY is trading in Tokyo’s opening hour at 107.88, between a range of 107.85 and 107.98, back blow 108 the figure and heavy. There is a mild risk-off tone stemming from a disappointing performance in global stocks and a mix of off-beat geopolitical noise and some soft economic data.
As for the U.S. data releases, which were broadly in line with market expectations, they evoked little reaction. However, US housing data came in on the softer side of market in June with housing starts falling 0.9% m/m (mkt: -0.7%, last: -0.4%) and building permits down 6.1% m/m (mkt: +0.1%, last: +0.7%). The Federal Reserve’s Beige Book stated that the economic activity continued to expand at a modest pace overall from mid-May through early July, with little change from the prior reporting period.
U.S. stocks continued to bleed out overnight as investors digested mixed earnings results along with geopolitics and U.S. data. The DJIA closed lower by116 points at 27,219, the S&P 500 index dropped 19 points to 2,984, while the Nasdaq fell 37 points to 8,185.
As for yields, US 2-year treasury yields fell from 1.86% to 1.83%, while 10-year yields fell from 2.11% to 2.05% and the markets priced 33bp of easing at the 31 July meeting (from 31bp yesterday).
Valeria Bednarik, the Chief Analyst at FXStreet, explained that the USD/JPY pair was heading into the Asian opening with an increased bearish potential:
“It broke below the 23.6% retracement of its latest daily slide, after meeting sellers around the 50% retracement of the same slump. In the 4 hours chart, the pair is back below converging moving averages, while technical indicators turned south, the Momentum struggling with its 100 level and the RSI currently at 43. The failed attempt to recover will likely discourage bulls, exposing the pair to a steeper decline.”