As the US slides into a supposed technical recession and punters cut Fed prices – at least in terms of aggressiveness – yields fall alongside the dollar as we look to wrap up the week of trading.
While not exactly grabbing the spotlight, I would still say the bond market is still the most important thing to watch this week. And that has certainly translated into the most significant currency flows, as the Japanese yen has soared since the FOMC meeting decision.
USD/JPY’s fall below 135.00 yesterday exacerbates further decline today with previous low briefly below 133.00 (low was 132.99).
Going back to the chart above, this is quite a technical signal as 10-year Treasury yields break below neckline support (white line), the 100-day moving average ( red line) and the lowest since May near 2.70% .
As recession fears intensify, this could be just what USD/JPY needs to produce a significant turnaround in sentiment after seeing the yen hurt since March.
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