USD/JPY hits fresh monthly lows below 107.00 as US yields drop to record lows

• 4Fed emergency rate cut triggers another rally in US bonds. 
• US dollar loses ground across the board, while yen benefits from lower yields. 

The USD/JPY pair dropped to 106.97, hitting the lowest intraday level since October 8 weakened by the ongoing rally in US bonds. The 10-year yield fell below 1% for the first time. 

The decision of the Federal Reserve to cut the Fed Funds rate by 50bps triggered the decline in yields and a slide of the US dollar across the board. While the greenback managed to recover some ground versus majors, it broke lower against the yen. 

The Japanese currencies gained momentum with the decline in yields and also after the decision failed to boost equity prices in Wall Street. The Dow Jones is falling more than 800 points and the Nasdaq tumbles 3.35%. Risk aversion also contributes to the stronger yen. 

Levels to watch 

The USD/JPY looks vulnerable and currently is testing the 106.95/107.00 support level. A break would clear the way to more losses, targeting 106.70; below the next relevant support might be seen at 106.45/50 (October 2019 low). On the upside, 107.30/35 (previous low) is now the immediate resistance followed by 107.65.