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  • USD/JPY  has started out the Tokyo day soft after a tremendous  rally form European prices onto the 112 handle.
  • In the 4 hours  chart, the pair continues moving away from its 100 and 200 SMA.

USD/JPY has been in the hands of the bulls overnight,  but the bullishness has faded as we move through the Tokyo  open with the price shying away from the overnight highs up at the 76.4% of July-Aug drop at 112.39. Currently, USD/JPY trades at 112.25, off the 112.38 high and up from the 112.25 session low. The Nikkei  is trading at 23,746.50, consolidating the rally from 23,029 while trade wars remain the hot topic in the media, likely distracting  the market from the matter at hand which is the divergence between the BoJ and FOMC with meetings in play tonight and next week respectively.  

Dollar due a bullish correction?  

Markets were risk-on markets despite the escalation of the trade dispute between the US and China. The pair was also supported by the 10-yr Tsy yields clearing the  3% mark as well as DJIA hitting all-time high following the big N225 breakout above the 4-month range top. However, we have the BoJ today seen on hold which underpins the upside CB divergence bid with the FOMC next week likely hiking  rates. The Dollar is potentially due  for a correction higher after its 2.5% decline over the  last five weeks. Should the market figure that Trump will play hardball on China into the mid-terms, then this trade spat is not going to be resolved any time soon, that should be dollar bullish in the event of an exodus  from EM-FX.  

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that in the 4 hours  chart, the pair continues moving away from its 100 and 200 SMA, with the shortest gaining upward traction, currently at around 111.45:

“In the mentioned chart, the Momentum indicator eases within positive territory, as a result of the pair being unable to surpass its previous high, but given that it remains near daily highs, and the RSI maintains gains around 65, the overall risk leans to the upside.”


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