USD/JPY hits new low as treasury yields slump on Fed rate cut bets

A sudden selling wave gripped the USD/JPY pair in the last hour, capping the recovery just shy of 102 handle and sending the prices back to daily lows near 101.50 levels.

USD/JPY capped by 102 barrier

Fresh bets of a Fed rate cut this year emerged across the financial markets after the Brexit decision, knocking-off yields on the treasury yields deep into the red, and thus, weighing heavily on the USD/JPY pair. The 2-year treasury yields, which mimics the short-term interest rates, dives -11% to trade around 0.582%, while the benchmark 10-year yields drop -5.09% to 1.499 levels. Meanwhile, the CME data shows a 7% probability of a rate cut this year.

Moreover, the yen remains in demand on increased flight to safety amid an unexpected Yuan weakening and on looming post-Brexit uncertainty. Moreover, the downward pressure on the major extends as the Nikkei 225 index pares gains.

Next of note for the major remains the second-tier US datasets, which may have limited impact on the price-action.

USD/JPY Technical levels to watch

In terms of technicals , the immediate resistance is located at 102.47/50 (daily high/ psychological levels). A break above the last, the major could test 103.19 (post-Brexit high). While to the downside, the immediate support is seen at 101.22 (daily S2) and below that at 101 (round figure).