USD/JPY breaks Tuesday's low, more downside ahead?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 24, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    USD/JPY has continued to push lower in Asian trade, with sellers finally being rewarded as Tuesday's low at 111.76 gets broken, sending the pair into new lows circa 111.70.

    Nikkei 225 falls back below 1%

    The downside acceleration in USD/JPY comes as the Nikkei 225 gives up its constructive bullish intraday trend and returns to trade back below 1%, currently -1.28%, approaching its opening negative gap now, following last risk-off US session.

    Will US/JP yield divergence play out in favour of bulls?

    On Tuesday, Kathy Lien, Co-Founder at BK Asset Management, wrote: "There's a very interesting divergence happening in USD/JPY right now. 2 year U.S. - Japanese 10 year yields are holding steady and moving slightly higher but USD/JPY has traded sharply lower."

    "Given the strong historical correlation between USD/JPY and the yield spread, either yields need to move lower or USD/JPY is due for a recovery. We believe that it is the latter because of how quickly and aggressively the pair has fallen", Kathy adds.
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