“¢ Struggles to build on FOMC minutes-led strong up-move to one-week tops.
“¢ The downtick remains unaffected by surging US bond yields/USD strength.
“¢ Renewed US-China trade war fears underpin JPY’s safe-haven status and exert pressure.
The USD/JPY pair extended its intraday retracement and is currently placed at the lower end of its daily trading range, eroding a part of previous session’s strong up-move to over one-week tops.
On Wednesday, resurgent US Dollar demand helped the pair to stage a solid rebound from the 112.00 handle and turn higher for the second consecutive session. The positive momentum seemed rather unaffected by disappointing US housing market data, with bulls taking cues from the latest FOMC meeting minutes.
A summary of the Federal Reserve’s meeting on Sept. 25-26 reflected confidence in the rate of economic growth and further fueled expectations that the central bank might continue raising interest rates gradually, despite growing criticism from Trump.
A hawkish assessment of the FOMC minutes, reinforced by the ongoing upsurge in the US Treasury bond yields, continued underpinning the greenback on Thursday. However, renewed US-China trade war fears triggered a fresh wave of global risk-aversion trade and boosted the Japanese Yen’s safe-haven status, which was eventually seen exerting some downward pressure on the major.
The global flight to safety largely offset the BoJ Governor Haruhiko Kuroda’s comments, reaffirming to maintain QQE, yield curve target and expand the monetary base in order to achieve their 2% inflation target. Bearish traders also seemed to have largely shrugged off the BoJ’s revised lower assessment for two regions in its latest regional economic report for October.
It would now be interesting to see if the pair is able to attract any fresh buying at lower levels or the current pull-back marks the end of the recent corrective bounce from near one-month lows, set on Monday. Market participants now look forward to some second-tier US economic data – the usual initial weekly jobless claims and Philly Fed Manufacturing Index for some fresh impetus later during the early North-American session.
Technical outlook
Omkar Godbole, Analyst and Editor at FXStreet writes: “The rebound from the trendline support has neutralized the bearish view put forward by the negative doji reversal on the weekly chart and has opened up upside toward 113.18 (April highs). A violation there would allow a test of supply at the recent high of 114.55.”
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