USD/JPY: Bears in control below 110.16 fractal and swing highs

• USD/JPY has been, for the most part, tucked in below the 110 handle with breaks through the figure faded.
• Wall Street wobbled overnight in a risk-off environment which supports the case for the downside.  

USD/JPY is trading at 109.79, slightly up from the lows of 109.72 and below the Asian high of 109.86.  Wall Street was tarnished with negative headlines overnight pertaining to risks associated to slower global growth.

Comments from the National Economic Council Directo,r Larry Kudlow, during an interview with Fox Business Network where he argued that there is still a long way to go before the U.S. will strike a trade deal with China was a major weight. There were also significant downgrades to growth from the BoE and European Commission further stoking concerns of a global growth slowdown and demand.

Market reactions

As a result, The Dow DJIA, dropped 220.77 points, or 0.9%, to 25,169.53, while the S&P 500 fell 25.56 points, or 0.9%, to 2,706.05. The Nasdaq Composite Index COMP dropped ell 86.93 points, or 1.2%, to 7,288.35. However, the benchmarks had all been down well over 1% at their worst levels on the day.

Meanwhile, the US 10yr treasury yield dropped from 2.69% to 2.65%, while 2yr yields fell from 2.52% to 2.48%, slowing up the greenback’s broad-based advance. “Futures markets continued to price little chance of any further Fed rate hikes in this cycle, with a 20% chance of a cut by December,” analysts at Westpac explained.  

USD/JPY levels

Valeria Bednarik,  the Cheif Analyst at FXStreet, explained that the pair offers a short-term neutral stance according to readings in the 4 hours  chart:

“It keeps developing above its 100 and 200 SMA, with the shortest advancing modestly above the larger one, both around the 109.40 level. The Momentum indicator in the mentioned chart lacks directional strength around its 100 level, while the RSI bounced from its mid-line, heading higher now at around 54. Bulls need to push the price above 110.16 to beat bears and be able to push the price higher, while the key to the downside continues being the 109.05 Fibonacci support.”