Thursday, March 22, 2018
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USD/JPY drops below 1H 200-MA on rising yield-led risk aversion
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  • USD/JPY dipped below 1h 200-MA of 107.23.
  • Stocks turn risk-averse, tracking rising treasury yields.

The Yen picked up a bid in Asia, courtesy of the rising bond yield-led risk aversion in the equities.

The currency pair fell below the 200-hour moving average (MA) of 107.23 and printed a session low of 107.15. As of writing, the spot is trading at 107.27.

The Fed minutes released in the North American session triggered speculation the central bank is prepping for aggressive rate hikes. Consequently, the markets began pricing in a more hawkish Fed. The US 10-year treasury yield rose to a four-year high of 2.96 percent, pushing the stocks lower.

The Dow index closed lower by 150 points. Meanwhile, as of writing, stocks in Australia are down 0.10 percent. Also, Germany’s DAX futures are pointing to a negative open.

Further, the risk aversion will likely worsen if the US 10-year treasury yield moves above 3 percent. So, corrective rallies in USD/JPY, if any, could be short-lived. Only a sharp drop in the treasury yields and the uptick in stocks could lift the USD/JPY pair.

USD/JPY Technical Levels

A break above 107.38 (upward sloping 1H 50-MA) would open up upside towards 107.58 (1h 10-MA) and 107.91 (overnight high). On the downside, breach of support at 107.15 (session low) would allow for a deeper sell-off to 106.84 (1h 100-MA) and 106.73 (50% Fib R of 105.55-107.91).

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