USD/JPY took a battering with risk assets plunging to an early Sydney and 6-month low at 105.974 in early Sydney trade. The Dollar closed at 107.40 yesterday, slumping to 106.45 in late New York. The drop in the benchmark US 10-year yield to 0.91%, down 9 basis points, contrasted with that of Japan’s JGB 10-year rate, at -0.12% (up 2 basis points). Wall Street’s collapse saw relentless selling in the USD/JPY pair. The Japanese Nikkei share market plummeted to 20,810 from 21,310 yesterday as stock investments by foreigners continued to fall.
USD/JPY has come off from above 112.00 in mid-February to this morning’s low at 105.974. One thing that will concern the Bank of Japan is the speed with which the Yen has climbed, and Japanese stocks have dropped. My many years of trading FX are telling me to expect the Bank of Japan Governor Haruhiko Kuroda and his colleagues at the Ministry of Finance to initially speak out against the Yen’s swift advance. Verbal intervention. The next question is when and how they will act. Expect more volatility in this currency pair with US Payrolls out tonight.
USD/JPY has initial support at 105.80 followed by 105.50 and 105.00. Immediate resistance can be found at 106.50 (key breakdown level) and 107.00. Look to trade a choppy 105.70-106.70 range. Be prepared to trade both sides. And watch for the BOJ.