- The US-China trade truce triggers risk-on trade and weighed on JPY’s safe-haven status.
- Surging US bond yields underpinned the USD and remained supportive of the up-move.
- Better-than-expected US ISM manufacturing PMI fails to provide any fresh bullish impetus.
The USD/JPY pair extended its sideways consolidative price action and held comfortably above the 108.00 round figure mark post-US ISM manufacturing PMI.
The pair built on last week’s goodish recovery move from multi-month lows and opened with a bullish gap in reaction to the latest positive trade-related development, wherein the US and China agreed to restart trade negotiations.
The US-China trade truce further forced investors to scale back their expectations for an aggressive Fed rate cut move, which was evident from an upsurge in the US Treasury bond yields and remained supportive of the pair’s strong bid tone.
Meanwhile, the US Dollar buying held on to its daily gains following Monday’s better-than-expected US ISM manufacturing PMI – coming in at 51.7 for June as compared to 51.0 expected, though failed to provide any fresh bullish impetus.
A downward revision of the previous month’s reading, coupled with concerns over slowing global economic growth – reinforced by awful PMI figures released since the weekend, kept a lid on any strong follow-through movement for the major.
Hence, it would be prudent to wait for a subsequent up-move beyond the 108.70-75 supply zone before confirming that the pair might have already bottomed out in the near-term and positioning for any further appreciating move beyond the 109.00 handle.
Technical outlook
As Valeria Bednarik, FXStreet’s own American Chief Analyst writes – “In the 4 hours chart, the pair is above its 20 and 100 SMA, while the 200 SMA converges with the top of the range at 108.65, a critical resistance that the pair needs to break to confirm additional gains in the upcoming sessions. The Momentum indicator eased within positive ground, rather signaling the lack of follow-through than anticipating an upcoming decline, while the RSI remains steady at 66.”
Share
