- Weighed down by the US-Japan trade worries, US dollar weakness.
- 110 or 111.50 on US payrolls and wages data?
The USD/JPY pair faded the recovery from two-week lows of 110.38 last hour, now heading back towards the midpoint of the 110 handle amid fresh selling seen in the US dollar across the board.
The greenback came under renewed selling pressure in early Europe, as markets continue to book profits off the table ahead of the all-important US labor markets, with the main focus likely to be on the average hourly earnings figures. The USD index reversed sharply from 95.07 highs to now print daily lows of 94.91, as investors await the sentiment on the European open for fresh impetus.
Earlier in the Asian session, the spot accelerated its overnight declines and reached two-week lows, as the Yen was broadly boosted by increased safe-haven flows fuelled after Trump’s overnight comments that suggested Japan is in the next line of fire regarding the trade issues.
More so, the 2-year US-JP yield differential remains in favor of the JPY bulls while upbeat Japanese real wage growth data also underpinned the sentiment around the Yen.
Looking ahead, the pair will continue to get influenced by the upcoming US jobs data while broader market sentiment amidst ongoing trade angst will continue to drive the Yen flows.
FXStreet’s Analyst, Omkar Godbole noted: “A weekly close below 110.00 would neutralize the bullish outlook and shift risk in favor of a drop below 109.77 (Aug. 21 low). A daily close below that level would confirm a bullish-to-bearish trend change, that is, the rally from the March low of 104.63 has ended and would open up downside towards 108.90 (50% Fib R of 104.63/113.18). On the higher side, 111.83 is the level to beat for the bulls.”
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