“¢ US-China trade optimism undermines JPY’s safe-haven demand and helped regain traction.
“¢ Positive US bond yields/ dovish BoJ’s inflation outlook remained supportive of the uptick.
“¢ Subdued USD price action fails to provide any additional boost and seemed to cap gains.
The USD/JPY pair regained positive traction on Wednesday and has now moved within striking distance of monthly tops, set last Friday.
The safe-haven Japanese Yen lost some ground amid improving risk appetite, especially after the White House economic advisor Larry Kudlow clarified that reports about the US cancelling a trade planning with China were “not true”.
Improving market sentiment was evident from some renewed pickup in the US Treasury bond yields, which coupled with a downward revision of BoJ’s inflation projections, had a rather negative impact on the JPY and remained supportive of the uptick.
Earlier on Wednesday, the BoJ maintained status quo and kept key policy tools unchanged, as was widely expected, but lowered the median core consumer price index (CPI) forecast for fiscal year 2019/20 to 0.9% from 1.4% expected in October.
The BoJ policy outlook, followed by the BoJ Governor Haruhiko Kuroda’s comments at the post-meeting press conference, reinforced expectations that the central bank is unlikely to begin normalizing its accommodative policy anytime soon and was seen biased toward the JPY bears.
Meanwhile, a subdued US Dollar price action, amid the partial US government shutdown and dovish Fed expectations, did little to provide any additional boost and turned out to be the only factor keeping a lid on any further strong up-move, at least for the time being.
Technical levels to watch
Any subsequent up-move is likely to confront some fresh supply near the key 110.00 psychological mark, above which the pair is likely to head towards testing the 110.25-30 horizontal resistance. On the flip side, the 109.35-25 region now seems to protect the immediate downside and is closely followed by the 109.00 handle, which if broken might accelerate the slide further towards the 108.60-55 area.
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