“¢ The USD fails to preserve early gains and assist the pair to build on intraday up-move.
“¢ The prevalent risk-off mood further collaborates towards capping any additional gains.
The USD/JPY pair held on to a mildly positive tone through the mid-European session, albeit has trimmed a part of its early recovery gains to levels beyond the 113.00 handle.
The US Dollar struggled to preserve early gains to the 97.20 area and has now drifted back into negative territory, which eventually failed to assist the pair to build on its intraday positive momentum.
Worries about the recent downfall in the US Treasury bond yields, leading to an inversion of the short end of the yield curve and signalling an impending recession, kept a lid on any meaningful USD up-move.
Meanwhile, a series of tweets by the US President Donald Trump dented investor confidence that a full resolution to the US-China trade conflict will be reached during a 90-day truce.
Fading optimism was evident from a sharp overnight selloff on Wall Street and a subsequent weakness across global equity markets, which was eventually seen benefitting the Japanese Yen’s safe-haven status.
Despite a combination of negative factors, the pair has managed to hold with modest daily gains as investors now seemed reluctant to place any aggressive bets amid absent relevant market moving economic releases.
With the US markets closed for a national day of mourning for President George H. W. Bush, trading volumes are expected to remain low and could lead to a subdued/range-bound price action through the US session.
Technical outlook
Valeria Bednarik, FXStreet’s own American Chief Analyst explains: “The 4 hours chart shows that the risk is skewed to the downside, as the pair develops below its moving averages, with the 200 SMA offering an immediate short-term resistance at 113.10. Technical indicators in the mentioned chart remain well into the negative ground, without directional strength, reflecting the limited interest bulls have on the pair, rather than signalling an upcoming decline.”
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