USD/JPY: Yen regains bids on Yuan devaluation, back below 102

A renewed bout of risk-aversion gripped the markets after the PBOC unexpectedly weakened the Yuan this Monday, triggering fresh bids for the safe-haven yen.

USD/JPY bounces-off lows above 101.50

The dollar-yen pair’s almost 100-pips recovery from lows lost pace near 102.50 levels and the rate dropped sharply towards daily lows, before recovering some ground to now trade around 101.85, still down -0.40% on the day.

The Japanese currency caught fresh bid-wave against its American counterpart last hours, following a Yuan devaluation by the Chinese central bank, sending USD/CNY to the highest levels since Jan 2011. Therefore, the markets were caught off-guard by a weaker Yuan fix and hence sought safety in safe-havens such as the yen, knocking-off USD/JPY towards daily troughs.

However, strong gains in the Japanese stocks on the back of so-called relief rally post-Brexit, helped cap the losses in USD/JPY. The Nikkei 225 index rallies +1.52% to 15,181 points. Looking ahead, markets will continue to digest the Chinese yuan devaluation news as dust settles over Brexit aftermath. While on the data-front, goods trade balance and flash services PMI from the US will be closely eyed.

USD/JPY Technical levels to watch

In terms of technicals , the immediate resistance is located at 102.47/50 (daily high/ psychological levels). A break above the last, the major could test 103.19 (post-Brexit high). While to the downside, the immediate support is seen at 101.52 (daily low) and below that at 101.22 (daily S2).