USD/JPY moves off daily highs but stronger Dollar limits downside

• USD/JPY trims gains as US Stocks reversed sharply.
• Downside limited by stronger US Dollar across the board.

The USD/JPY pair reached earlier today at 110.48 the highest level in six days but then pulled back, trimming gains to the 110.10/15 area. Near the end of the session it was hovering around 110.25/30, about to post the second daily gain in-a-row.

The retreat from the highs took place amid a sharp decline in Wall Street. The Dow Jones dropped 400 points from the top and it was down 0.51%. At the same time, US yields fell further.

The slide in USD/JPY was limited by a rally of the US dollar. DXY Futures broke above 95.00, approaching last week highs. The Index was about to post the highest daily close since July 2017.

The decline in US equities took place after comments from US President Trump adviser Kudlow that mentioned “Trump is not retreating on China”. Before those comments, Emerging Markets were already sharply lower adding to the negative sentiment.

USD/JPY Technical outlook

“The 4 hours chart shows that the pair is trading not only above the mentioned Fibonacci level but also above its 100 and 200 SMA that still lack directional strength an run parallel a few pips below it”, says Valeria Bednarik, Chief Analyst at FXStreet.

According to her, the technical indicators pulled down from near oversold readings but remain within positive levels, “suggesting that the pair will likely remain within familiar levels”.