USD/JPY: downside playing out as Tokyo traders come on-line

USD/JPY is trading offered in Tokyo as the risk-off sentiment expands after a quiet session in both the US and London markets. USD/JPY is currently trading at 109.15 having made a high of 109.47 and a low of 109.14 so far.

USD/JPY was pressured by lower US yields lows, although the cash bond market was closed for the holiday. However, the 10-year treasury note futures instead implied an additional 5bp fall to below 2.90%, being a three-week low leaving the yen trading in the vicinity of 109.40 and closing flat. Political angst keeps the yen propped up where European headlines are taking centre stage before the N.Korean summit taking place on June 12th and US nonfarm payrolls before that at the end of the week.

European politics  in the driving seat

Populist leaders in Italy failed to form a government  – ANZ

As far as Europen politics go, there is a storm brewing within the fragile eurozone project as Spanish elections could be on the cards as well as an Italian fall out with respect to the nation unable to gel a government together. The Italian President, Sergio Mattarella, is now facing impeachment due to vetoing the coalition’s choice for their finance minister.  Mattarella was reported saying that the worsened spread between Italian and German 10-year government bond yields, (a key measure of risk) is too problematic. In Spain, a no-confidence motion has rocked the Madrid establishment pulling the eurozone into a fresh crisis. Mr Rajoy, the Prime Minister, warned that the political instability will play havoc on Spain’s fragile economic recovery. This following claims over illegal payments from a slush fund run by the Popular Party’s ex-treasurer, Luis Barcenas.  

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet, explained that technically, the 4 hours  chart  shows that the pair remains above the 200 SMA but below the 100 SMA, both losing their previous bullish strength:

“Technical indicators turned higher, the Momentum crossing its mid-line but the RSI barely at 42 which is not enough to confirm additional gains ahead, as the pair would need to break above the 109.90/110.00 region, to interest again bulls.”