USD/JPY rebounds from 1-week lows, lacks follow-through

• The USD/JPY pair remained depressed amid persistent US-China trade uncertainty.
• Sliding US bond yields undermined the USD and added to the intraday selling bias.
• Fed’s patience stance seemed to be the only factor that helped rebound from lows.

The USD/JPY pair reversed an early dip to one-week lows and climbed to fresh session tops in the last hour, albeit lacked follow-through.
 
The pair extended this week’s rejection slide from the very important 200-day SMA, levels just above the 109.00 handle, and remained depressed through the Asian session on Thursday. The prevalent risk-off mood, amid persistent US-China trade uncertainty, was seen underpinning the Japanese yen’s perceived safe-haven demand and kept exerting some downward pressure on the major.

Focus remains on trade developments

Against the backdrop of the US President Donald Trump’s threat to impose more tariffs if phase one of a trade deal is not signed, reports that a US-China trade deal is unlikely this year continued denting investors’ appetite for riskier assets. The same was evident from a sea of red across the global equity markets and reinforced by some follow-through slide in the US Treasury bond yields.
 
This coupled with a subdued US dollar demand further collaborated to the pair’s early slide to an intraday low level of 108.28. However, the fact that FOMC minutes on Wednesday indicated the US central bank was effectively on hold with interest rates helped limit any further losses, rather assisted the pair to quickly recover around 40 pips from daily lows and jump back above mid-108.00s.
 
Meanwhile, the uptick lacked any strong bullish conviction amid possibilities of a further escalation in tensions between the world’s two largest economies, especially after the US Senate unanimously passed the Hong Kong Humans Right and Democracy Act bill on Tuesday. Hence, it will be prudent to wait for a strong buying before positioning for any further near-term appreciating move.
 
In absence of any major market-moving US economic releases on Thursday, the incoming trade-headlines might continue to influence the broader market risk sentiment and help traders grab some meaningful opportunities.

Technical levels to watch