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  • Yen rises across the board despite risk appetite.
  • US dollar continues under pressure, DXY drops below 93.00

The USD/JPY dropped further after the beginning of the American session and even as Wall Street indexes climbed to fresh highs. The pair broke below 106.00 and tumbled to 105.53, reaching the lowest level since August 31.

Broken correlation

The yen is outperforming on Monday despite the rally in equity prices. The Dow Jones is gaining 1.19% and the S&P 500 1.59%. Usually the Japanese currency weakens amid risk appetite, but that is not the case today.

The improvement in market sentiment did not stop USD/JPY to drop to the lowest in two weeks. Also gold is rising. The worst performer among currencies is the US Dollar. The DXY fell below 93.00, to the lowest since Thursday.

The decline in USD/JPY took place even amid a margin decline in US Yields and ahead of the FOMC meeting that will start tomorrow. The key development over the last hour in Japan has been the victory in a party election of Yoshihide Suga, the next prime minister. He has been chief cabinet secretary to Abe and he is seen as a continuation.

Technical levels

The USD/JPY is having the worst slide since August 28. It could post the lowest close since then, after being unable to move away from 106.00 for weeks. A close around current levels would be a sign of vulnerability ahead. Below 105.50 the next support is seen at 105.05/10 (August lows).

On the upside, a recovery above 106.00 should keep the pair in the current range. A break of 106.50 should clear the way to more gains and toward 107.00.

More levels