USD/JPY sold-off aggressively to 113.75, risk-off back in vogue?

The USD/JPY pair ended its consolidation phase seen over the last hours and broke sharply to the downside amid renewed broad-based US dollar weakness in tandem with the US equity futures and Treasury yields.

USD/JPY: Wednesday’s low at 113.63 on sight?

The spot came under fresh selling pressure in Asia, mainly driven by a renewed risk-off wave that gripped the markets, boosting the demand for the safe-haven Yen and gold at the expense of the higher-yielding assets such as the US indices futures and Treasury yields. As a result, the US dollar too followed suit across its main competitors, with USD index knocked down to 94.31, down -0.38% on the day.

There is no major reason seen behind the steep drop in the spot, except for the fact that markets remain nervous ahead of the next Fed Chair announcement due later on Thursday, with Jerome Powell almost priced-in as the next Fed Chief.

Meanwhile, attention now turns towards US jobless claims data and Fedspeaks for fresh momentum on the prices, as the dust settles over the Fed decision, which had virtually no impact on the fx markets.

USD/JPY Levels to consider                                                                                

Jim Langlands at FX Charts noted: “..on the topside, back above the session high would open the way to 114.45/50, an increasingly strong hurdle to overcome, but above which could see a test of the descending trend resistance, now at around 114.90. A break of 115.00 would then see little resistance until 115.20 and then 115.50. On the downside, support will be seen at 113.75 and at the session low at 113.60, below which could then head back to the 31 Oct low (112.95) although this seems unlikely today. If wrong, a sustained break of 113.00 would see us back in the previous 112/113 range, where 112.75 would be the first level of support ahead of 112.30.”