USD/JPY clings to gains above 108.50 as attention shifts to Wall Street opening bell

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  • US-Mexico deal boosts the market sentiment on Monday.
  • S&P 500 Futures point to a positive start in Wall Street.
  • US Dollar Index recovers toward 97.

The USD/JPY pair started the week with a bullish 40-pip gap with the risk-on flows dominating the FX space in the early trading hours of the Asian session.  After advancing to a fresh 10-day high of 108.71, however, the pair struggled to preserve its strength and was last seen trading at 108.62, adding 0.4% on a daily basis.

U.S. President Donald Trump’s announcement of the U.S. reaching a deal with Mexico and suspending tariffs allowed the 10-year Treasury bond yield recover more than 2.5% on Monday to reflect a risk-on atmosphere. Moreover, major European stock indexes turned north to reaffirm the positive sentiment. Finally, the S&P 500 Futures is up 0.4% on the day to suggest that Wall Street is likely to start the day in the positive territory, which could help buyers remain in control of the pair’s price action in the second half of the day.

Additionally, China reported a larger-than-expected trade surplus of $41.65 billion earlier in the day to improve the market mood even further.

On the other hand, following last week’s more-than-1% fall, the US Dollar Index is rebounding from its lows, providing additional support to the pair. The only data from the U.S. today will be JOLTS job openings, which is likely to be ignored by the participants. At the moment, the US Dollar Index is up 0.3% on a daily basis at 96.85.

Technical levels to consider

The pair could face the initial resistance at 108.70 (daily high) ahead of 109 (psychological level/20-DMA) and 109.60 (May 31 high). On the downside, supports are located at 108.40 (daily low), 108 (psychological level) and 107.80 (Jun. 5 low).

 

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