There are signs the U.S. dollar could tumble against the Japanese yen, as an equity sell-off points to worsening global risk sentiment. The dollar was dumped on Friday at alarming speed, and that is having huge consequences for the currency this week.
Japanese shares tumbled on Tuesday, dragged down by technology stocks tracking overnight Wall Street losses. European stocks have since retreated from all-time highs.
In times of uncertainty, with risk aversion on the rise, funds usually flow into the safe-haven yen.
USD/JPY's recent failure to register a daily close above the 109.64 Fibonacci level, a 61.8% retrace of the 110.97 to 107.48 (March to April) EBS drop, caused a bull trap.
There are said to be USD/JPY offers from 109.00 upwards, capping near-term recovery moves - though the thick and rising daily Ichimoku cloud, that spans the 107.27-109.34 region, might slow USD/JPY losses.
(Martin Miller is a Reuters market analyst. The views expressed are his own) ((email@example.com))