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Analysts at ING point out that the USD/JPY remains highly sensitive to the changing geopolitical environment and expect the pair to remain sensitive to incoming headlines on US-China trade ties and EM geopolitics.

Key Quotes

“While news of US-China trade talks has partially lifted risk sentiment, trading hopes of a better political world have proved to be unfruitful so far this year.”

“With US leading activity indicators starting to soften, we see most future paths pointing towards  a lower USD/JPY  – and the pair crossing the 110 psychological level could be a strong confirmation of this.”

“The domestic story has also been marginally supportive for the yen  – not least since the Bank of Japan’s subtle hawkish tweak last month. The idea of ‘stealth tapering’ has also spread to the central bank’s ETF purchases  – with commentators noting the central bank has been less on hand to curb recent stock market volatility.”

“We feel the  yen has reverted back to exhibiting its usual safe-haven characteristics in a fragile environment and we expect the currency to remain the markets’ preferred safe-haven vehicle.”