Dow Jones erased all of its 2018 gains in one day as the US stock market plunged in a volatile trading on Monday. The reasons behind the sell-off could be spotted amid concerns for rising bond yields and higher inflation which could have prompted worries of a faster rate hike pace. Friday’s strong US employment report strengthened the argument for such a case. The US Dollar gained on buying interest, as investors sought it’s relative safety according to various media reports. It would be indicative that the USD outperformed most of its rivals but the JPY. Overall we expect the USD to continue to strengthen, however the gains could be somewhat limited.
USD/JPY dropped yesterday breaking the 109.20 support level. The drop could be interpreted as JPY outperforming the USD as a safe haven. However we would not hurry to call for a further sell off, as the Relative Strength Index has approached 30 and in the hourly chart, volatility is decreasing. We could see the pair stabilizing during the day and even experience some bullish pressures in a possible correction phase. Should the pair find new selling orders we could see it breaking the 108.30 support level and aiming for the 106.95 support area. On the other hand should it find fresh buying orders we could see it breaking the 109.20 resistance line and aim for the 111.05 resistance zone.