The scale of the sell-off in stocks is the biggest in eight months, does this mean one should sell USD/JPY?

The sell-off in stocks spurred a bid for safe-haven assets such as gold and yen. In addition, if the 10-year Treasury yield falls below 3%, this could drag USD/JPY lower.

The Dow Jones index fell 831 points overnight, and Shanghai stocks slid 146 points earlier, marking a 5.37% drop. Amid the risk-off trading environment, yen is trading near a three-week high against the dollar as US stocks rout extends into regional Asian stocks.

There is no sign of a haven bid for the US dollar despite the broad weakness being seen across Asian equities and commodities. After the dollar index hit the 96 price level, we believe there could be some profit-taking positions leading to USD/JPY shorts.

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