USD/JPY takes a hit as Yellen keeps mum on interest rate outlook

The Dollar-Yen pair dropped to a session low of 109.27 after Fed Chair Yellen speech at Jackson Hole offered no hints on monetary policy and the outlook for interest rates.

Yellen’s speech was largely a recitation of the financial crisis, regulatory failures and how things have improved since then. 

Treasury yield curve flattens

The Dollar-Yen, which had caught bid ahead of Yellen speech fell from the intraday high of 109.84 to 109.27 and was last seen trading around 109.41 levels. The yield curve or the spread between the US 10-year treasury yield and the 2-year Treasury yield narrowed/flattened to 84 basis points from the previous day’s print of 85 basis points. The flattening of the yield curve is negative for the USD. 

USD/JPY Technical Levels

A sustained break above 110.00 [zero figure + resistance offered by the trend line sloping lower from 114.49 and 1109.95] would open doors for double bottom neckline hurdle of 110.95. A violation there would confirm the short-term bullish trend reversal and shall expose 200-DMA of 112.47. On the downside, support is seen at 109.38 [5-DMA], which, if breached could yield a sell-off to 108.85 [previous day's low] and 108.60 [Aug 18 low].