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  • Risk-on market profile fails to lift USD/JPY above 107.50.
  • Dollar weakness likely caps further gains ahead of US data, Powell.

The  USD/JPY  pair turned south in the European trading, having faced rejection once again just below the midpoint of the 107 handle, as the US dollar sheds the overnight gains across the board ahead of the US PPI data and Fed Chair Powell’s speech.

Risk-on sentiment to keep the downside capped

The spot gained over 20-pips in the Asian session amid a risk-on market profile, as indicated by the rally in the regional equities and Wall Street futures amid renewed US-China trade optimism. Further, the risk-on trades fuelled bullish moves in the US Treasury yields across the curve, helping the pair retest Monday’s high at 107.46.

However, the bears continued to guard the 107.50 barrier, supported by a generalized weakness seen in the US currency across its main peers on diminishing safe-haven appeal, as markets cheer the resumption of the US-China trade talks, starting this Thursday – October 10th.

Meanwhile, the latest leg down in the major can be mainly attributed to fresh selling seen the S&P 500 futures after China’s Foreign Ministry said that they are preparing a retaliation to the backlist of the 28 Chinese companies by the US over human rights violation.

The US-China trade headlines will continue to influence the pair ahead of the US PPI and Fed Chair Powell’s speech.

USD/JPY Technical levels to watch