USD/JPY: Risk-Off Boosting JPY Ahead Of US GDP

USD/JPY Current price: 111.90

• US Treasury yields down to early October lows dragging USD/JPY lower.
• October Tokyo inflation matched market's expectations, passed unnoticed.

Risk-off is once again dominating the FX board, with equities collapsing and safe-haven assets on the run. Wall Street, which posted a nice comeback Thursday, has already trimmed such gains in after-hours trading, Asian shares markets collapsed and European ones follow-suit, defying multi-month lows. Government bonds and on strong demand, with yields down. The benchmark yield for the 10-year US Treasury note is currently at 3.08 percent, its lowest in over three weeks.

As for the USD/JPY pair, it's trading below the 112.00 level, and not far from its weekly low. more relevant, the pair is nearing the monthly low at 111.62. Japan released Tokyo October inflation at the beginning of the day, which came in as expected, not enough to affect sentiment-related trading.

To close the week with a high note, the US will release today the first estimate of Q3 GDP. The world's largest economy is expected to have grown by 3.3 percent in the three months to September, following a 4.2 percent growth in Q2. The reading tends to have a strong impact on the market due to its surprise factor. Anyway, an in-line or above-expected outcome should limit the decline of the USD/JPY pair and even trigger a recovery. Whether the advance will be sustainable or not, will depend on how equities react to the header.

Intraday technical readings favor a downward extension, as in the 4 hours chart, the pair is trading well below its 100 and 200 SMA, with the shortest crossing below the larger one, for the first time since early September. Technical indicators in the mentioned chart head south almost vertically, with the Momentum still above its weekly low and the RSI at 38, indicating that further declines are likely, particularly on a break below the mentioned 111.62.

Support levels: 111.65 111.20 110.90

Resistance levels: 112.30 112.60 113.00  

View Live Chart for the USD/JPY