USD/JPY drops sharply from 2-month highs as Wall Street turns lower

The yen gained momentum across the board during the last hour amid a sharp reversal in equity prices in Wall Street. The Dow Jones dropped almost a hundred points from the highs, falling into negative territory. Also, US yields moved off daily highs adding fuel to the rally of the Japanese currency. 

USD/JPY peaked earlier today after the US Durable Goods Orders report at 113.23, the highest level in two months but then turned to the downside. From the top dropped more than 50 pips and at the moment, it trades at 112.60, at the lowest since the beginning of the European session. 

The greenback lost strength across the board but still remains in positive territory for the day. The US Dollar Index peaked at 93.38 and remains above 93.00, rising for the third day in a row. 

Levels to watch 

The USD/JPY reversal, if it extends under 112.50 it could represent a rejection from the area above 112.70 and also from 113.00, pushing the pair to the previous trading range between 111.50 and 112.70. 

At the moment, the pair holds around the 20-hour moving average, a break below would add more strength to the yen.  If the greenback manages to recover the lost ground it just lost and closes significantly above 112.65, it could remain on track for a test of 113.50.