Research Team at BNP Paribas, suggests the USD remains generally on a soft footing following Fed Chair Yellen’s testimony yesterday, but what stands out is the pace of the USD’s decline vs the JPY. Key Quotes “After breaking the 114.02/10 support during Wednesday’s NY trading session the pair has fallen sharply to 112.10. The next key support is the Jun 13-Jul 14 uptrend at 111.33. We view that USDJPY’s move can be explained by two factors – one in rates and one in equities. Firstly, although US 2yr rates received support yesterday by Yellen’s comments, the 10yr Treasury yield continues to decline. We have been noting that recently USDJPY’s moves have been most correlated with the 10yr part of the US curve and USDJPY’s recent move appears to be hand-in-hand with the decline of Treasury yields. USDJPY’s moves recently have also been highly correlated with the Nikkei, although it has been more difficult for the pair to take its cue from equities this morning with Japanese markets closed for the holidays and many Asia markets returning from the Chinese New Year holiday and catching up with the recent weakness in global equities. Going forward, the wires should be monitored carefully for comment from Japanese officials, but it would likely take a clear indication that the BoJ will cut its IOER rate soon to soften the JPY. Elsewhere in this environment USD is likely to continue to struggle against the G10 funders JPY and EUR. Fed Chair Yellen will appear in front of the Senate Banking Committee while data releases are limited to jobless claims.” For more information, read our latest forex news.