- USD/JPY retreats from multi-month tops amid reviving safe-haven demand.
- Trump signed Hong Kong democracy bill and weighed on the risk sentiment.
- The downside is likely to remain limited amid relatively thin liquidity conditions.
The USD/JPY pair edged lower during the Asian session on Thursday and eroded a part of the overnight strong gains to six-month tops.
The safe-haven Japanese yen gained some traction on Thursday amid a slight deterioration in the global risk sentiment after the US President Donald Trump signed two bills supporting Hong Kong’s pro-democracy demonstrators. The latest development was seen as derailing recent progress in trade negotiations.
Hong Kong tensions weigh on the risk sentiment
Meanwhile, China threatened to take firm counter-measures, which might further complicate efforts to scale back a 16-month long trade war and dented investors’ appetite for riskier assets. The same was evident from a softer tone around equity markets and boosted demand for perceived safe-haven assets.
On the other hand, the US dollar seemed struggling to capitalize on Wednesday’s mostly upbeat US economic data-led positive move and held on the back-foot, doing little to lend any support to the major. The downside, however, remained cushioned as investors now seemed reluctant to place any aggressive bets.
Given that the US markets will remain closed on Thursday in observance of Thanksgiving Day, the incoming trade-related headlines might continue to influence the broader market risk sentiment and turn out to be an exclusive driver of the pair’s momentum amid relatively thin liquidity conditions.
Technical levels to watch
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