USD/JPY Fundamental Daily Forecast – Safe-Haven Buying Driving Japanese Yen Higher

The Dollar/Yen is trading lower on Tuesday. Weaker global equity markets are driving investors into the safe-haven Japanese Yen. The selling started in the Asian markets, following the lead from Wall Street which finished mixed. There was no particular event fueling the selling pressure. The price action suggests investors are expressing caution amid rising global tensions.

At 0605 GMT, the USD/JPY is trading 112.470, down 0.352 or -0.33%.

On Monday, the Dollar/Yen was mostly supported by a 4.1% rally in China’s Shanghai Composite. However, this move lasted only one session suggesting it was fueled by short-covering rather than new buying.

On Tuesday, the Greater China markets were trading lower. Hong Kong’s Hang Seng index fell 2.03 percent while China’s Shanghai Composite and Shenzhen Composite declined 1.37 percent and 1.229 percent respectively. Japan’s Nikkei 225 was down 2.44 percent while the Topix Index fell 2.36 percent.

All three major U.S. futures indices were also trading lower during their pre-market session and in a position to challenge their lows for the month.

In other news, the Bank of Japan’s Core CPI came in at 0.5%, matching the previous reading.

Forecast

Look for downside pressure today if investors continue to look for protection in the Japanese Yen. A risk-off trading session could drive the USD/JPY into a series of retracement levels at 112.480, 112.175 and 111.984.

The Japanese Yen could get a further boost if investors seek shelter in U.S. Treasurys. This would drive down yields, making the dollar a less-attractive investment.