USD/JPY recovers to 110.20 as market sentiment improves slightly

• 10-year US T-bond yield erases daily losses.
• Wall Street turns flat following a negative start to the day.
• US Dollar Index continues to float above 97.50 mark.

Following a dip below the critical 110 level earlier in the day, the USD/JPY pair staged a modest rebound in the last hour and was last seen trading at 110.16, losing only 9  pips on a daily basis.

Although there were no convincing headlines to ease concerns over the trade dispute with the United States and China, markets seem to be reacting positively to U.S. President Trump’s latest tweets. “China has just informed us that they (Vice-Premier) are now coming to the U.S. to make a deal. We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers…great for U.S., not good for China!” Trump said.

After starting the day in the negative territory, major equity indexes in the U.S. pared their early losses and moved into the positive territory in the last hour. Furthermore, the fact that the 10-year T-bond yield turned virtually flat on the day after losing as much as 0.8% to confirm the slightly improved market sentiment.

Meanwhile, amid a lack of significant macroeconomic data releases from the U.S., the DXY is struggling to find direction for the third straight day and moving up and down in a tight range above the 97.50 area, suggesting that the risk-perception is likely to remain as the sole driver of the pair’s price action at least until the inflation data from the U.S. on Friday.

Technical levels to watch for