USD/JPY moves to a session low of 111.82 as risk aversion deepens

USD/JPY D1 21-02

It looks like the yen is starting to get back some sense of what it should be doing as we start to see USD/JPY get a bit of a reality check after the swing move higher over the past two days from 110.00 to 112.00.

Price is now down to session lows near 111.80 as we see risk aversion continue to deepen in the early European morning, with yen pairs dragged across the board amid lower bond yields. The aussie is also down to fresh lows of 0.6590 against the dollar.

I pointed out yesterday that the divergence between yen pairs and Treasury yields will be one to watch, so perhaps we are starting to see things make "sense" again - for now at least.

But as long as the risk-off mood persists, there's still every chance for that correlation to return so I reckon if you're banking on a further run higher in USD/JPY amid a break from the norm, the 112.40 level will provide a good indication for the next move.

Otherwise, the pair could be in for a painful correction back lower from hereon.