- Yen cheers risk-off in the Europeans equities, as German political tensions sour sentiment.
- Focus shifts to US ISM manufacturing PMI for fresh trading opportunities.
After a brief phase of consolidation near 110.75 levels last hours, the bears regained poise in the European session, now pushing the USD/JPY pair towards the midpoint of the 110 handle amid widespread risk-aversion.
The sell-off seen in the European equities at the start of the third quarter intensified the risk-off moods, spurred by the renewed German political jitters, which offered a fresh boost to the safe-haven bids for the Yen.
More so, the looming July 6 tariff deadline combined with Yuan devaluation also appears to keep the sentiment buoyed around the Yen. However, the losses may remain capped by persisting demand for the US dollar amid trade war fears. The US dollar index trades 0.21% higher at 94.83 levels.
In the day ahead, the pair Is likely to get influenced by the broader market sentiment and USD dynamics ahead of the US ISM manufacturing PMI release.
USD/JPY Technical Levels
Omkar Godbole, FXStreet’s Analyst, notes: “A close above 110.94 on Friday would do little to reinvigorate the bullish move from 104.63 (March low) and only a convincing break above 111.67 (long-term falling trendline hurdle) would put the bulls back into the driver’s seat. It would also mean the sell-off from the March 2015 highs above 125.00 has ended (long-term bull trend reversal). On the downside, a daily close below the 50-day MA of 109.84 would shift risk in favor of a drop to 108.82 (38.2 percent Fibonacci retracement of 104.63-111.40).
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