USD/JPY drops to fresh 5-month low of 109.34

USD/JPY fell to 109.34; the lowest levels since November 17. The pair breached the key psychological support of 110.00 on Tuesday and fell below the monthly 50-MA of 109.59. 

Stops hit, further losses likely on weak Chinese PPI

It is being reported that the latest move lower is due to stops being triggered on positional longs. 

The sell-off could gather pace if the Chinese PPI cools more than expected. Moreover, it is the spike in the Chinese PPI in mid 2016 that set in motion the ‘great reflation trade’. Hence, a weak Chinese PPI could worsen the risk-off moves in the market and strengthen the demand for the Japanese Yen. 

USD/JPY Technical Levels

The immediate support at 108.95 (monthly 10-MA), if breached, would open doors for a sell-off to 108.54 (200-DMA) and 108.34 (falling channel floor). On the higher side, breach of resistance at 109.60 (previous day’s low) would shift risk in favor of a re-test of 110.00 (psychological hurdle) and 110.35 (5-DMA).