USD/JPY drops from 114.00 amid global bond yields tumble, led by US Treasuries

• USD/JPY slides for the second day in a row, below 113.50.
• The market sentiment is upbeat, on better than expected US Nonfarm Payrolls.
• Lower US T-bond yields acted as a headwind for the greenback.
• USD/JPY: A daily close beneath 113.50 exposes the 113.00 figures as the next support level.

USD/JPY extend its slump for two-straight days, down 0.32%, trading at 113.38 during the New York session at the time of writing. The market sentiment is upbeat, portrayed by US equity markets rising to all-time highs during the day amid a better than estimated US Nonfarm Payrolls report. Also, lower US Treasury yields, with the 10-year, which strongly correlates with the USD/JPY pair, are plunging eight basis points, down to 1.44%. 

US Nonfarm Payrolls rose by 534K, better than the expected

The Bureau of Labour Statistics (BLS) in the US reported that the US economy added in October 534K new jobs to the economy, better than the 425K foreseen by analysts. Furthermore, the Unemployment Rate dipped from 4.7% to 4.6%.

Moreover, last month’s numbers reported that payrolls are stil short, 4.2 million below pre-COVID-19 levels. Further, the Unemployment rates for Hispanic Americans fell, whereas the African American and the Asian rates were unchanged.

The USD/JPY pair initially reacted to the upside, reaching a daily high around 114.00, but retreated the move once market participants dissected the report. It seems that the report was ignored after three central banks throughout the week pushed backward the idea of higher rates, as expressed by the RBA, the Fed, and the Bank of England in its monetary policy statements.

That, in turn, spurred the sell-off in the global bond market, led by US Treasuries, dropping severely, benefitting the prospects of safe-haven assets, like the Japanese yen and the precious metals.

USD/JPY Price Forecast: Technical outlook

The USD/JPY is in consolidation within the 113.50-114.50 range. Furthermore, the 50 and the 100-simple moving averages (SMA’s) hover around 114.00, acting as a tailwind for price action in the last couple of days. At press time, the 113.50 level respected by USD/JPY traders has been broken, opening the door for further losses towards the 113.00 figure.

For USD bulls to resume the upward trend, they need to reclaim the 114.00 figure. In that outcome, the following resistance on the way north would be the downslope trendline that travels from October 20 high towards November 1 high, around 114.30. A breach of the latter would expose the 2021 high at 114.70.

On the flip side, a break below 113.00 could open the way for further losses. The first demand zone would be the September 30 high at 112.00.