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  • Bulls failed to capitalize on the early uptick to the 109.00 neighbourhood.
  • The USD held strong amid rising bond yields but failed to impress bulls.
  • Even renewed US-China trade optimism did little to provide any impetus.

The USD/JPY pair failed to capitalize on its early uptick and has now retreated around 40-pips from near three-week tops set earlier during the Asian session on Tuesday.

The pair stalled its recent positive momentum and started retreating from just ahead of the 109.00 neighbourhood, with a combination of supporting factors failing to impress bullish traders and doing little to provide any meaningful impetus.  

The US Dollar stood tall near two-month tops and remained well supported by Friday’s stronger than expected US Q2 GDP growth figures, which further diminished odds of an aggressive rate cut move by the Fed at its upcoming meeting.

The same was reinforced by a modest pickup in the US Treasury bond yields, albeit the pair struggled to attract any buying interest and also shrugged off improving global risk sentiment, which tends to weigh on the Japanese Yen’s safe-haven status.

Renewed optimism over a possible resolution of the prolonged US-China trade disputes remained supportive of improving investors’ appetite for perceived riskier assets and was evident from a mildly positive tone surrounding equity markets.

Even the latest BoJ monetary policy decision to maintain status quo and a promise to keep the current ultra-low rates for an extended period, at least through spring 2020, was largely ignored by market participants or did little to influence the price-action.

Meanwhile, the downside is likely to remain limited as investors might now be reluctant to place any aggressive bets and prefer to wait on the sidelines ahead of the highly anticipated FOMC decision, scheduled to be announced during the US session on Wednesday.

In the meantime, the US economic docket – featuring the releases of Core PCE Price Index (the Fed’s preferred inflation gauge) and the Conference Board’s Consumer Confidence Index will be looked upon for some short-term trading opportunities later during the early North-American session.

Technical levels to watch