USD/JPY drops below 109.00 on risk aversion

• JPY gains momentum on risk aversion. 
• Wall Street heads for another decline. 
• USD/JPY approaches weekly lows. 

The USD/JPY pair bounced to the downside during the American session amid risk aversion. It broke below 109.00 and fell to 108.56, reaching the lowest since Tuesday. From the lows rebound as US stocks trimmed losses. 

At the time of writing, USD/JPY was trading at 108.80/90, headed toward the lowest close in a week. Despite moving off lows, the pair still appears under pressure. 

The Dow Jones index was losing 450 points after being down 650 points. Risk aversion boosted momentarily the demand for US bonds. After a brief spike lower, US yields approached again multi-year highs and limited yen’s strength. 

Technical outlook & levels

“The risk remains toward the downside as in the 4 hours chart, the intraday advance not only stalled around a static resistance level but also around a bearish 100 SMA, while technical indicators in the mentioned chart have turned sharply lower, now in bearish territory and poised to extend their declines,” says Valeria Bednarik, Chief Analyst at FXStreet. 

According to her, the pair has bottomed multiple times between 108.30 and 108.40 these since late January, making of the area the one to break to confirm additional declines ahead, toward 107.31 ( 2017 low).