- Trade tensions remain elevated.
- US Dollar Index posts small gains ahead of PMI data.
- 10-year US T-bond yield drops more than 2% on Monday.
The USD/JPY pair started the week with a small bearish gap and touched its lowest level since mid-January at 108.07 before staging a modest recovery. As of writing, the pair was trading near Friday’s closing level of 108.30. However, the fact that the 10-year U.S. Treasury bond yield is losing more than 2% and staying at its lowest level since September 2017 suggests that the pair’s rebound is unlikely to gather momentum with the JPY continuing to find demand as a safe-haven.
Reflecting the dismal mood, the S&P 500 Futures is down nearly 0.4% on the day, suggesting that Wall Street is likely to open the day in the negative territory. Over the weekend, the Chinese government published a white paper to update the public on their stance in the U.S.-China trade dispute and said that the U.S. was responsible for failed negotiations. Meanwhile, U.S. President Trump, via Twitter, claimed that China was subsidizing its products to have them continue to be sold in the U.S. while reiterating that many companies were leaving China in order to avoid tariffs.
Later in the session, the IHS Markit and the ISM will be both releasing their Manufacturing PMI reports. Meanwhile, the risk sentiment is likely to continue to impact the pair’s price action.
Technical outlook via FXStreet Chief Analyst Valeria Bednarik
The USD/JPY pair remains depressed as the dollar is out of the market’s favor, short-term poised to continue falling according to the 4 hours chart, as it remains far below strongly bearish moving averages, while technical indicators remain within oversold levels, maintaining their downward slopes. The pair could correct higher only after recovering the 108.60 level, yet the dominant trend favors another leg south.
Support levels: 108.00 107.70 107.25
Resistance levels: 108.60 109.00 109.45
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