USD/JPY ignores trade/geopolitical pessimism ahead of US CPI, Powell’s testimony

• USD/JPY clings to 200-day SMA amid trade/geopolitical tension.
• Hong Kong diplomats show the capability to tame the violence, US President Trump says ‘close’ to trade deal with China.
• Recently upbeat Fedspeak, inactivity around key technical levels, shift market focus to upcoming data/events.

Despite the latest updates concerning Hong Kong protests and the US-China trade deal, the USD/JPY pair traders prefer being on the “wait and watch” mode while the quote seesaws around 109.00 during initial trading session on Wednesday.

While the uncertainty surrounding the trade deal between the United States (US) and China, coupled with unrest in Hong Kong, keep exerting downside pressure on the pair, overall hawkish sentiment at the Federal Reserve limits the downside off-late.

The US diplomats, including President Donald Trump and White House Economic Adviser Larry Kudlow, recently showed readiness to inflate the Chinese tariffs if the phase one talks fail. The politicians also made it clear that rolling back tariffs is on the cards but not until the deal gets confirmation.

On the other hand, Hong Kong’s Chief Secretary Matthew Cheung and Secretary for Security John Lee Ka-Chiu both conveyed confidence in the government’s capacity to tame the protests. However, the consequences of continued violence seem to be unthinkable for them.

Elsewhere, the US Federal Reserve (Fed) officials keep lauding the present monetary policy with the latest quote from the Federal Reserve Bank of Minneapolis President Neel Kashkari  mentioning, “Feeling a little bit better about the US economy than he had a few months ago.”

That said, the US 10-year treasury yields recover to 1.924% by the press time while Asian stocks drop amid geopolitical/trade concerns and the Reserve Bank of New Zealand’s (RBNZ) refrain from a rate cut.

Markets are now preparing for the Federal Reserve Chairman Jerome Powell’s Testimony in front of the Joint Economic Committee while also waiting for the October month Consumer Price Index (CPI) and another dossier of the Fedspeak.

Technical Analysis

An upside clearance of 109.50 could flash 110.00 on the chart while late-may high around 110.70 could become buyers’ favorite then after. Meanwhile, an ascending trend line since August 26, around 108.55 now, could keep the pair’s downside limited.