USD/JPY inter-markets: deterioration in risk-appetite could trigger a fresh leg of downslide

Despite of the recent dovish rhetoric by BoJ Governor Haruhiko Kuroda and hawkish comments from the Fed officials, the USD/JPY pair has failed to register any meaningful recovery and is dangerously poised to decisively break through 100.00 psychological mark.

After a bullish gap-up reaction on Monday, led by comments from the Fed vice chair Stanley Fischer that the US economy was nearing the central bank’s inflation and labor-market targets, the greenback witnessed renewed selling pressure across the board on Tuesday. 

Market participants remained highly skeptical of any further Fed tightening in the immediate future, with the CME group's FedWatch tool currently pricing-in less than 25% probability of such an action till November. 

Hence, investors now keenly await for the Federal Reserve Chairwoman Janet Yellen's speech on Friday at Jackson Hole symposium for fresh clues over the central bank's monetary policy outlook, which would eventually drive the greenback in the near-term. 

Meanwhile, flattening of the US and Japanese 10-years Treasure bond yields have failed to provide any fresh impetus to the major as the pair has been solely driven on shifting Fed rate-hike expectations. However, continuous slide in the Volatility Index (VIX) is the only intrinsic not supportive of the ongoing slide.

Friday's macro releases that includes - second quarter GDP release and monthly durable goods order data from the US, and August CPI data from Japan, would also be looked upon in order to determine the pair's near-term movement.

In the meantime, any deterioration in global risk appetite would trigger a fresh bout of volatility across global financial markets and eventually benefit the safe-haven appeal of the Yen and lead to a fresh leg of weakness for the USD/JPY pair.