USD/JPY declined below 106.00 despite the U.S. dollar’s rebound against a broad basket of currencies as the global risk-off sentiment increased demand for Japanese yen.
Yesterday, the S&P 500 declined by almost 3% as the sell-off in tech stocks continued. This move put pressure on global market sentiment and provided support to the yen which often benefits from global market turmoil.
The USD/JPY pair remained depressed for the second consecutive session on Wednesday and dropped to over one-week lows, around the 105.80-75 region in the last hour.
The overnight rout in the US equity markets provided a strong boost to the safe-haven Japanese yen. This, in turn, was one of the key factors that continued exerting some follow-through pressure on the USD/JPY pair.
Given that the previous day’s downfall dragged the pair below a multi-day-old trading range support, the downtick could further be attributed to some technical selling. However, a combination of factors extended some support.
Following some early volatile swings, the US equity futures now seems to have stabilized a bit. This coupled with the prevalent US dollar buying interest helped limit any further deeper losses, at least for the time being.
Even from a technical perspective, the USD/JPY pair has been oscillating between two converging trend-lines over the past few weeks. The range-bound price action constitutes the formation of a symmetrical triangle, suggesting indecision over the next leg of a directional move.
There isn’t any major market-moving economic data due for release on Wednesday. This makes it prudent to wait for some strong follow-through selling before traders again start positioning for the resumption of the prior depreciating move.
USD/JPY LONG (Buy)
ENTER AT: 106.188