- USD/JPY stops the previous run-up amid recent risk-off.
- Chinese media doubts trade optimism even after phase-one.
- Fears of hard Brexit reignited after Conservatives’ election victory.
USD/JPY trades around 109.60 at Tuesday’s Tokyo opening. That said, the pair recently struggles to extend the previous recovery as markets doubt the latest optimism surrounding the phase-one, Brexit concerns.
Despite agreeing on the phase-one, the United States (US) and China’s trade relations are being terms as ‘noisy ceasefire’ by the South China Morning Post (SCMP). The news states that businesses and former trade officials at China wary of getting carried away by the latest deal.
On the other hand, ITV’s Robert Petson considers the risk of hard Brexit as the United Kingdom’s (UK) Prime Minister (PM) will soon forward the bill that supports no transition delay beyond 2020.
With this, the risk tone gets heavier as the US 10-year treasury yields decline to 1.87% while S&P 500 Futures losses 0.14% to 3,193 by the press time.
An active week ahead”¦
In addition to the trade/Brexit headlines, monetary policy meeting by the Bank of Japan (BOJ) and headline inflation will also entertain momentum traders during the week. While the BOJ isn’t expected to alter the present monetary policy, appreciation of the latest fiscal measures could help the Japanese yen (JPY) strength further on Thursday. Elsewhere, Friday’s inflation data could keep exerting downside pressure on the Japanese currency.
The quote ignored downbeat activity data from the US on Monday as risk sentiment grew amid optimism surrounding the US-China trade deal. Markets also responded to the end of uncertainty relating to which party will rule the UK after the general election.
Moving on, today’s US Industrial Production, Fedspeak and housing market data can offer immediate direction to the quote.
Technical Analysis
Buyers await a clear break of the monthly top surrounding 109.75 to target 110.00 and May month high near 110.70. Meanwhile, 21-day Exponential Moving Average (EMA) near 109.00 holds the key to fresh declines towards 108.45/40 support area.
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