USD/JPY breaking further to the downside, testing 111.50

Currently, USD/JPY is trading at 111.48, down -0.21% on the day, having posted a daily high at 111.83 and low at 111.43.

USD/JPY is making fresh lows and testing the bull's commitments in early Asian trade at the mid-point of the 111 handle, dragging EUR/JPY with it as previously suggested in today's EUR/JPY intermarket article as a possible scenario:

EUR/JPY intermarket: the cross stopped in its tracks on Wall Street's sell-off

The market tone is risk-off in a major way. The yen is garnering demand with stocks tanking on Wall Street overnight within the reversal of the Trump reflation trade and a correction that was warned of in  Just a reason or two to short the 'March rate hike herd'

There are mounting concerns that the Fed is stuck between a rock and a hard place and markets are starting to discount as many as three hikes for the rest of 2017. GDP is projected lower by the Atlanta Fed to below 1%, the labour force is underperforming in key areas such as wages, demographics and skilled labour while the costs of living continue to rise. There is also the matter of the US debt ceiling and a potential crisis in Washington subsequent of a possible divide between the far right Republicans and the Democrats over Trump's proposed policies. Markets are concerned that Trump's fiscal policies may not be implemented while the Democrats could use the debt ceiling as a means to negotiate Trump's policies and real them in before the debt ceiling extensions can be approved and implimented by law. 

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that from a technical point of view, the bearish potential remains strong, albeit the pair has a major support around 111.65, from where it bounced several times during the past two months:

"Nevertheless, and in the 4 hours chart, the price is well below its 100 and 200 SMAs that anyway remain flat, while technical indicators remain within negative territory, with the RSI now consolidating around 28, somehow reflecting easing selling interest. At the same time, the pair is unable to recover above 112.00, the 38.2% retracement of late 2016 rally, now the immediate resistance."