USD/JPY has erased Macron rally, 10-yr T-yield hit 7-month low

Dollar-Yen pair fell to a low of 109.23 in the overnight trade as the US 10-year treasury yield hit a fresh 7-month low of 2.13%.

The pair currently trades around 109.45; which is the lowest level since April 24. Essentially the pair is back to square one… i.e. the level last seen before Macron’s victory in the first round of the Presidential elections lit a fire under European equities. The ‘Macron risk-on’ pushed the USD/JPY to a high of 114.37 (May 10 high) before the weakness in the treasury yields pushed it back to 109.45 levels.

The data docket is thin; hence the spot remains at the mercy of the action in the European equities and the treasury yields.

Banking woes in the Eurozone Periphery nations have made a comeback and that could keep stocks under pressure and Yen and treasuries well bid.

USD/JPY Technical Levels

The daily RSI; at 35; signals potential for further losses in the pair. The MACD shows the bearish move is gathering pace. A break below the previous day’s low of 109.22 would open up downside towards 109.00 levels. A violation there exposes 108.13 (April low).

On the higher side, breach of resistance at 109.59 (April 25 low) could yield a revisit to 110.23 (May 18 low). A daily close above the same would revive the bullish view and open doors for 112.13 (Apr 24 high).

Note - Once again the flattening of the yield curve hurt the US dollar. The difference in yield between two and 10-year Treasury notes narrowed 2.9 basis points to 84.71 bps on Tuesday, its lowest level since October 3.