USD/JPY erases gains as US stocks turn negative

The yen gained momentum across the board during the American session boosted by a reversal in equity prices in Wall Street and despite rising US bond yields. USD/JPY dropped from above 111.50 toward 111.00. 

USD/JPY unable to move off July lows 

The pair rose earlier today to 111.70, boosted by a recovery of the US dollar and by a slide in US bonds that sent the 10-year yield back to 2.32%, the level it had yesterday before the FOMC meeting. 

USD/JPY peaked when the Dow Jones reached a new all-time-high at 21,789. From those highs, the Dow pulled back almost a hundred points and now is at 21,738 up 0.13%, far from the highs. The Nasdaq is falling sharply 0.82%. The reversal in risk appetite did not increase the demand for US bonds so far but weakened the greenback against the yen. 

From the top, if fell to 110.93. At the moment, USD/JPY trades at 111.10/15, holding a bearish tone in the short-term. Price is back again near July lows as it remains unable to hold above 111.50 and limited by 112.00.

If the pair remains above 111.00, volatility is likely to ease ahead of the Asian session. Economic data on Friday includes inflation from Japan and US Q2 GDP. 

USD/JPY Levels to watch 

To the downside, the key level to watch is the area near July lows around 110.60/70. A break lower would clear the way to more losses, with a potential target at 110.00. On the upside, the immediate resistance is seen at 111.70 (daily high) followed by the stronger 111.90/112.00 area, where the 20-day moving average stands; a daily close on top could signal that a near-term bottom is in place.