USD/JPY: Upside to remain limited on risk aversion

• USD/JPY rejected again from above 110.00. 
• Equity prices in Wall Street print fresh daily lows. 
• Risk aversion favoring JPY. 

The USD/JPY pair found resistance at 110.25, failed to hold above110.00 and dropped to 109.70. The pair is headed toward the first decline after rising during the previous three days, when it recovered from 108.70. In January bottomed at 108.25, the lowest in four months. 

The yen and the US dollar resumed the upside late during the US session after equity prices in the US hit fresh lows. The recovery of the Dow Jones was short-lived, it was falling more than 547 points or 2%.  The sell-off in Wall Street is becoming more dramatic. Since Friday, the Dow lost more than 1,000 points.

Risk aversion favors the yen, not only against the US dollar. The demand for the Japanese currency rises when investors look for safety. 

Technical outlook 

“The pair has partially lost the upward potential seen last Friday, as it fell back below the 38.2% retracement of its latest decline, meeting intraday selling interest on attempts to recover above it”, said Valeria Bednarik, Chief Analyst at FXStreet. 

She notes the 4 hours chart shows USD/JPY keeps battling around its 100 SMA, while the Momentum indicator bounced from its 100 level and the RSI indicator hovers around 59, indicating that selling interest remains limited.