“¢ Struggles to build on early uptick amid a modest USD retracement.
“¢ Flattening of the US yield curve/trade tensions weighs on the buck.
The USD/JPY pair continued with its struggle to sustain/build on the momentum beyond the 111.00 handle and has now retreated to the lower end of its daily trading range.
The pair failed to capitalize on its early up-move to fresh six-week tops and was being capped by a mildly softer tone surrounding the US Dollar. Currently trading around the 110.85-80 region, the latest leg of downslide lacked any obvious catalyst and seemed unaffected by a modest uptick in the US Treasury bond yields.
Meanwhile, growing concerns that a full-blown global trade war would slow economic growth and ease inflationary pressure worldwide, leading to flattening of the US yield curve was seen as one of the key factors keeping the USD bulls on the defensive.
Even the prevalent buoyant sentiment around European equity markets, which tends to dent the Japanese Yen’s perceived safe-haven appeal, did little to provide any fresh bullish impetus, albeit might contribute towards limiting any immediate sharp downfall.
In absence of any major market moving economic releases, the USD/US bond yield dynamics, along with fresh trade-related headlines, which might influence the broader market risk sentiment, would continue to act as key determinants of the pair’s momentum.
The key focus, however, would remain on this week’s heavyweight US macro data, including the keenly watched NFP, which might help determine the pair’s next leg of directional move.
Technical outlook
Omkar Godbole, Analyst and Editor at FXStreet writes: “Should the pair find acceptance above 111.67, then the resistance at 112.71 (50-month moving average) will likely come into play.”
“On the downside, a daily close below the 50-day moving average of 109.89 would shift risk in favor of a deeper pullback towards 108.82 (38.2% Fib R of 104.63-111.40),” he adds further.
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