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  • The safe-haven JPY was being weighed down by the latest US-China trade optimism.
  • Weaker US bond yields kept the USD bulls on the defensive and might further gains.

The safe-haven Japanese yen remained on the defensive at the start of a new trading week and lifted the USD/JPY pair back closer to the very important 200-day SMA, around the 109.00 handle.
The pair added to Friday’s goodish recovery move from near two-week lows and gained some follow-through traction during the Asian session on Monday. The incoming positive trade-related headlines continued denting demand for traditional safe-haven currencies, including the Japanese yen and turned out to be one of the key factors driving the pair higher.

Positive trade developments remain supportive

In the latest development, Chinese state media Xinhua said on Sunday the two countries had “constructive talks” on trade in a high-level phone call on Saturday. This comes on the back of last week’s comments by US officials that they were close to securing a trade deal with China, which helped offset a subdued US Dollar demand and remained supportive of the pair’s uptick.
The USD bulls remained on the defensive in the wake of Friday’s generally disappointing US manufacturing data, which largely negated slightly better-than-expected October monthly Retail Sales. This coupled with a modest pullback in the US Treasury bond yields further weighed on the greenback and might keep a lid on any runaway rally for the major, at least for the time being.
Moving ahead, there isn’t any major market-moving economic data due for release on Monday. Hence, the incoming US-China trade headlines might continue to influence the USD price dynamics/broader market risk sentiment and play a key role in producing some short-term trading opportunities.

Technical levels to watch