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Aug 13 - 01:55 PM

USD/JPY - COMMENT-Michigan Sentiment Dive Erases USD/JPY's Post-NFP Rally, More Risk Exists

By Randolph Donney  —  Aug 13 - 11:52 AM

USD/JPY has tumbled through key support by 110, and is probing the last decent props at 109.76, amid tumbling Treasury yields after University of Michigan preliminary consumer sentiment for August collapsed to a more than 10-year low nAQN04IY2D.

Prices have already erased the gains scored since last Friday's seemingly strong U.S. employment report.
A close below 109.76, the 50% Fibo of August's 1.9% rebound on rising Treasury yields amid increased Fed tapering expectations, would leave just the 61.8% Fibo at 109.52 as support ahead of August's 108.725 EBS trough.

The dollar and Treasury yields were already retreating before that stunning sentiment news, as the market had already priced in the Fed announcing tapering at September's meeting nL1N2PK0TP, but not the widening COVID cases in the U.S. that are prompting new restrictions and apparently unnerving consumers, if the Michigan sentiment collapse is any indication.

USD/JPY has fallen faster than the more modest pullback in 5-year and 10-year Treasury-JGB yield spreads would suggest.
The rapid plunge below the flat cloud base and 38.2% Fibo at 110.05, straddled by 10-, 21- and 30-day moving averages at 109.95-10.06, and deeply oversold intraday oscillators might allow for a bounce toward 110.

However, bears are in control heading into Tuesday's crucial U.S. retail sales report.

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Refinitiv IFR Research/Market Commentary


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