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  • Flight-to-safety boosts the demand for JPY on Monday.
  • US Dollar Index records daily gains near 96.
  • Wall Street starts the day modestly lower.

The USD/JPY broke below 113.50 in the late Asian session and spent the European morning in a tight consolidation channel as the JPY stayed resilient against the amid risk-aversion. However, the pair came under a renewed selling pressure in the last hour and touched its lowest level in two weeks at 113.04. As of writing, the pair was trading at 113.22, losing 0.45% on a daily basis.

At the start of the week, resurfacing concerns over China – U.S. trade conflict and rising Italian/Germany 10-year bond spread on Italian budget crisis pushed investors away from riskier assets and the safe-haven JPY gathered strength against its rivals. Reflecting the markets’ risk perception, major European indices are suffering heavy losses with the Euro Stoxx 50 and the UK’s FTSE 100 indexes are both erasing 0.8% at the time of press. Meanwhile, Wall Street also started the day in the red but stays relatively quiet as market volume remains weak due to the Columbus Day holiday.

However, the weakening demand for Europen currencies allowed the USD to gain traction and the US Dollar Index rose above the 96 mark to help the pair limit its losses. With no macroeconomic data releases from the U.S. on Monday, the US Dollar Index seems to be consolidating its gaily gains in the 95.80/90 area, and remains on track to close the day in the positive territory.  

Technical outlook

Despite today’s fall, the RSI indicator on the daily chart continues to float above the 50 handle, suggesting that the bearish pressure is not strong enough to push the pair lower yet. On the downside, supports are located at 113 (daily low/psychological level/20-DMA), 112.55 (Sep. 27 low) and 111.85 (50-DMA). Resistances, on the other hand, align at 113.90 (daily high), 114.50 (Oct. 3 high) and 115 (psychological level).