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USD/JPY slumps to November lows near 112.40 as risk aversion dominates

  • Flight-to-safety allows JPY to outperform its rivals.
  • Falling US T-bond yields drag DXY lower.
  • Wall Street looks to close the day with sharp losses.

The USD/JPY, which stayed stuck in a tight range below the 113 mark for the majority of the day, lost its footing in the NA session and fell to its lowest level since late October at 112.41. As of writing, the pair was trading at 112.47, losing 0.3% on the day.

Major equity indexes in the U.S. started the day lower amid escalating concerns over the U.S. - China trade conflict and the heavy selling pressure surrounding the technology shares. As stocks extended their slide in the session, the JPY started to find demand as a safer alternative to drag the pair lower. At the moment, both the Dow Jones Industrial Average and the S&P 500 indexes are down 1.7% on the day while the Nasdaq Composite index is erasing nearly 3%.

On the other hand, the risk aversion boosted the demand for T-bonds and pulled their yields lower on Monday to force the greenback to weaken against its peers. The US Dollar Index, which tracks the greenback against a basket of six major currencies, was last down 0.25% on the day at 96.20.

There won't be any macroeconomic data releases from Japan on Tuesday and the risk perception is likely to stay as the primary driver of the pair's movements.

Technical levels to consider

Supports for the pair could be seen at 112.40 (daily low), 112.10 (100-DMA) and 111.60 (Oct. 15 low). On the upside, the first resistance is located at 113.00 (50-DMA/psychological level) ahead of 113.60 (Nov. 16 high) and 114.00 (Nov. 14 high). 

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