USD/JPY sinks to 1-1/2 month lows amid flight to safety

The greenback remained heavily offered against its Japanese counterpart, with the USD/JPY pair tumbling to a one-and-a-half month lows near 109.35-30 region.

Rising geopolitical tensions in the Middle East, after Saudi Arabia, Bahrain, United Arab Emirates and Egypt, in a coordinated move, broke diplomatic ties with Qatar, coupled with jitters over the upcoming UK general election and former FBI Chief James Comey’s testimony before a Senate panel underpinned demand for traditional safe-haven assets - like the Japanese Yen. 

   •  USD/JPY under pressure, bearish on a close below 110.00 – UOB

Adding to this, investors now seemed convinced that the recent US economic data disappointment might now force the Federal Reserve to adopt a more dovish monetary policy stance. The view is further reinforced by a sharp slide in the US treasury bond yields, which failed to extend any support to the US Dollar and stall the pair's slump to its lowest level since April 21.

On the economic data front, the release of JOLTS job openings data from the US is unlikely to provide any immediate respite for the USD bulls and hence, the pair breaking below the 109.00 handle and continuing with its downward trajectory remains a distinct possibility.

   •  US: JOLTS data in focus today - Nomura

Technical levels to watch

A follow through selling pressure below 109.30 level is likely to drag the pair below the 109.00 handle to 108.85 intermediate support en-route its next major support near 108.45-40 region.

On the upside, any recovery attempts beyond mid-109.00s might now confront resistance near 109.75 level, which if cleared might trigger a short-covering bounce back towards the key 110.00 psychological mark ahead of 110.25-35 strong horizontal barrier.