The anti-risk Yen was the winner again during yesterday’s session as the dollar lost some ground after Fed's Bullard voiced his concerns for inflation, global growth and the impact of the tariff wars. A dovish St Louis Fed president Bullard who is a voter this year said that a rate cut might be 'warranted' soon amid mounting risks to the outlook. The decline in US 10-year yields and equities also helped this recent bearish narrative on this pair. Moreover, the inversion between longer and shorter-term rates imply that the markets are pricing in a rate cut for the second half of 2019. The bearish sentiment will likely continue today as Fed Chair Powell will be giving a speech, possibly confirming investors’ recent speculations.
The Dollar/Yen continued to break the bullish market structure by dropping below 108, possibly heading towards the yearly low 107.77 for a retest. If the bears will be able to break that level, then we expect a further sell-off will likely take place taking price towards 107.50. The bulls, however, will need to break back above 108.50-60 to regain short-term control.
Support: 107.77 / 107.50
Resistance: 108 / 108.40