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  • USD/JPY holds on to the recovery gains triggered late-Friday.
  • Mixed headlines surrounding the US-China trade deal and the US-Middle East tension fail to rule out the broad USD weakness.
  • No major data/events keep the focus on trade/political news for fresh impulse.

USD/JPY rises to 109.45 amid the initial Asian session on Monday. The pair extended the Friday-end pullback despite receiving no clear direction from the weekend news. Though, year-end holiday mood and need for more clues stop prices from moving further.

Market’s risk tone stays firm amid the increasing odds of the US-China trade deal ever since the US President Donald Trump signaled nearness to sign in, without any details. During the weekend, the South China Morning Post (SCMP), conveyed China’s readiness to strictly follow the phase-one promises on the conditions that the US respects their part and refrain from interfering with the internal matters concerning Taiwan, Hong Kong, Xinjiang, etc.

Geopolitical tension in the Middle East also got a hit during the weekend, as noted by Bloomberg, considering the US military’s “defensive strikes” in Iraq and Syria. Pentagon mentioned on Sunday that the action was in response to the killing of the US civilian contractor on an Iraqi military base.

Read:  What you need to know before markets open: AUD technically precarious, fundamentals are balanced

The S&P 500 Futures and the US 10-year Treasury yields, the keys to gauge the market’s risk sentiment, are yet to move for the week. However, their performance by the late-Friday indicates a pullback and the same could negatively hurt the pair considering an absence of any major positive during the weekend.

Moving on, market activity is likely to stay sluggish amid the year-end holiday mood and a lack of major data/events up for publishing. As a result, trade/political headlines will become drivers.

Technical Analysis

Unless providing a daily close beyond 110.00, prices keep the risk of revisiting the 21-day Simple Moving Average (SMA) level of 109.20 and 200-day SMA, surrounding 108.70, during the declines.