USD/JPY off five-month low, but not out of the woods yet

• The spot attempts recovery in tandem with the Treasury yields.
• Fed’s emergency 50 bps rate cut threw US dollar under the bus.
• Coronavirus risks continue to underpin the yen amid risk-off.

USD/JPY is seen making minor recovery attempts from a new five-month low of 107.18, reached after the US Federal Reserve (Fed) unexpectedly cut the interest rates by 50 bps to cushion the coronavirus impact on the economy.

Fed shocks the markets

The surprise Fed rate cut announcement triggered a sharp sell-off the US dollar across its main competitors, as the US benchmark 10-year Treasury yields slumped to a fresh record low of 1.028%.

Moreover, the Fed’s pre-emptive move to tackle the coronavirus crisis cautioned the investors, as a risk-aversion wave gripped the US markets and bolstered the safe-haven demand for the yen.

The renewed uptick in the spot is mainly driven by the bounce seen in the US yields, which in turn fueled a generalized recovery in the greenback. The USD index bounces-off a two-month low of 97.00 to now trade around 97.30, almost unchanged on the day.

However, the further recovery gains remain elusive amid steep losses in the S&P 500 futures and sell-off on the Wall Street indices. Meanwhile, the risk remains to the downside in the majors amid looming coronavirus risks.

USD/JPY technical levels to consider