- Major European indices record heavy losses on Monday.
- Trade concerns are likely to continue to weigh on Wall Street.
- US Dollar Index inches closer to the critical 95 mark.
The USD/JPY pair recorded solid gains during the first half of the day but failed to extend its gains above the 111 mark as the weakening market sentiment helps the safe-haven JPY show resilience against the greenback. As of writing, the pair was trading at 110.88, adding 0.1% on the day.
Earlier today, the U.S. Commerce Secretary Wilbur Ross said that President Trump wouldn’t change his stance on the trade policy even if stock markets continued to fall. Pressured by the dismal performance of the major European equity indices, Wall Street opened the day lower with the Dow Jones Industrial Average and the S&P 500 losing 0.45% and 0.7% respectively.
On the other hand, the greenback strength on Monday keeps the pair’s losses limited. Ahead of the manufacturing PMI data from the United States, the US Dollar Index continues to retrace last Friday’s losses. At the moment, the US Dollar Index is up 0.65% on the day at 94.85.
Although there were no clear catalysts that may have triggered a USD buying wave, the divergence between the Federal Reserve and other major central banks’ monetary policy stance could be the primary reason being the USD demand on the first trading day of the second half of the year.
Technical levels to consider
The pair could encounter the first resistance at 111.00/05 (psychological level/daily high) ahead of 111.40 (May 21 high) and 112.00 (psychological level). On the downside, supports could be seen at 110.30 (20-DMA), 110/109.95 (psychological level/50-DMA) and 109.60 (200-DMA).
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