USD/JPY falls to weekly lows as Dow Jones losses 500 points
- US dollar losses momentum on US tariffs plan and on a more balanced testimony from Powell.
- Yen strengthens on the back of risk aversion.
USD/JPY dropped further during the US session and fell below the key 106.50 area. The pair bottomed at 106.18, the lowest level since February 19. Near the end of the session, it was at the lows, with a strong bearish tone.
The slide in US stocks boosted the yen. The Dow Jones was falling more than 500 points (-2.01%) and the S&P 500 was down 1.65%. The acceleration to the downside boosted the yen and weakened the US dollar. The US Dollar Index reversed from the highest level in a month at 90.94 and dropped to 90.30.
USD/JPY earlier today peaked at 107.19 after the release of the upbeat ISM Manufacturing index, but since then lost more than a hundred pips.
Technical outlook
“The pair is neutral-to-bearish according to the 4 hours chart, as the intraday recovery stalled below a bearish 100 SMA, now converging with the 23.6% retracement of February's advance around 107.35, the immediate resistance, while technical indicators hover around their mid-lines with no clear directional strength”, said Valeria Bednarik, Chief Analyst at FXStreet.
A consolidation below 106.00 could add more negative momentum to the US dollar. A close under that level would be lowest since November 2016. A recovery on top of the 107.70 area (also the 20-day moving average) could point toward a recovery of the US dollar.