USD/JPY inter-markets: Heavy, mid-Oct lows eyed ahead of Fed?

USD/JPY is seen on a declining trend so far this week, extending last Friday’s sell-off, mainly driven by aggressive selling in the US dollar amid re-emergence of US election jitters, especially after FBI probe into Clinton’s emails and latest polls showing Trump in the lead for the US presidential election race.

The Japanese yen emerged the second best performer in the European session today, behind the NZD, as uncertainty and anxiety ahead of the US elections triggered a fresh risk-aversion wave across the financial markets.

The safe-haven yen tends to benefit in times of panic and market unrest. The CBOE Volatility Index (VIX), a fear gauge, keeps its range intact near two-month tops around 19 handle, reflecting risk-off persists at full steam.

Moreover, tumbling treasury yields ahead of the FOMC decision due later today also collaborates to the selling spiral seen behind USD/JPY. Treasury yields across the curve remain under pressure as markets expect the Fed to remain on-hold today, while skepticism over Fed’s intent on a Dec rate hike also keeps the US yields and dollar undermined.

In terms of FX, the immediate resistance is located at 104 (round figure). A break above the last, the major could test 104.12 (20-DMA) and 104.38/34 (5 & 10-DMA) beyond the last. While to the downside, the immediate support is seen at 103.15 (Oct 19 low) next at 102.83/82 (100 & 50-DMA) and below that at 102.22 (daily S1).