Search ForexCrunch
  • USD/JPY flat in the Tokyo open but capped on diminished  risk appetite overnight.  
  • The technical picture remains neutral with  indicators  flat in the 4-hour  chart.

USD/JPY is flat in the Tokyo open, trading with a fraction of a percentage point to the downside, having stuck to a narrow 10-pip range  between 108.60 and 108.70 so far. Fundamentally, USD/JPY has been capped on  market’s presuming a soft dollar policy from the US administration while trade talks between the US and China carry plenty of prospects for pitfalls despite the recent  optimism  for a trade deal.  

Risk appetite was jolted by trade headlines

Overnight, risk appetite was jolted by the news that Trump and Fed Chairman Powell had met to discuss the strength of the dollar. At the same time, there were reports of a CNBC news that Chinese officials were concerned over prior comments with respect to tariffs from Trump,  wing to his reluctance to roll back any tariffs that had already been marked –  Subsequently, USD/JPY dropped from 109.05 early NY to just above 108.50.  At the same time, USD/CNH bounced from 7.0185 to highs above 7.0300. As for US  treasury  yields, the US 2-year yields has been on the bid from 1.60% to 1.63% before falling back to 1.59% due to the  US-China trade pessimism. The  10-year yields similarly fell from 1.85% to 1.80%.  

USD/JPY levels

As or the technical outlook, Valeria Bednarik, the Chief Analyst at FXStret, explained that USD/JPY faced pressure and, unable to hold above the 200-day simple moving average, dropped from a daily peak of 109.07 to a low of 108.50:

“The technical picture remains neutral, with the pair trading within its recent range and  indicators  flat in the 4-hour  chart. In the daily chart, USD/JPY consolidates between the 100-day SMA, offering dynamic support at 107.70, and the 200-day SMA acting as  resistance  at 109.00. The pair would need a break of either side of this range to determine a longer-term bias.

On the upside, a breakout of 109.00 could lift the pair towards the 109.50 zone, ahead of the more significant area of 109.70-90, where the 100- and 200-week SMA offer strong resistance. On the downside, immediate support stands at last week’s low of 108.23, followed by the 108.00 psychological level.”