Search ForexCrunch
  • USD/JPY turns south amid risk-aversion, fresh dollar selling.
  • The spot clings onto 5-DMA support at 107.02.
  • US ISM Manufacturing PM to wrap up a light trading day.

USD/JPY is holding onto the 5-DMA support just above 107.00 in early Europe, having faced rejection once again near 107.50. At the moment, the spot loses 0.10% to trade at 107.09.

The latest leg down in the US dollar across its main competitors is the main catalyst behind the drop in the major from a tepid bounce to near 107.20. The US dollar index stalled its bounce at 99.19 and now attacks 99.00. Sluggish US fundamentals combined with the dovish Fed keep the upside attempts in check.

The greenback popped in Asia after US-China trade tensions resurfaced and dampened the market mood. US President Donald Trump threatened retaliatory tariffs on China over the latter’s alleged mishandling of the coronavirus outbreak.

The pair spiked with the dollar and hit a daily high of 107.41. Growing deflationary fears in Japan, following downbeat Tokyo area CPI release, also collaborated with the uptick earlier today.  

In the day ahead, traders will continue to track the dollar price-action and broad risk sentiment amid holiday-thinned markets and ahead of the key US Manufacturing PMI reports from both Markit and ISM.

Technically, on a breach of the 5-DMA support, the pair is likely to test the recent demand zone near 106.40. Alternatively, the resistance at 107.34/41 (10-DMA/ daily high) will be tested beyond which 20-DMA at 107.75 will be on buyers’ radar.

USD/JPY additional technical levels to consider