USD/JPY: Recovery stalls near 107.70, focus on trade, US data

  • NY Fed disavowed President Williams’ comments, USD and US rates bounce.
  • Trade/ geopolitical worries, Fed easing bets to keep gains capped.
  • US Michigan Consumer Sentiment data eyed amid risk-on.

The US dollar recovery gathered steam across the board in the European session, sending USD/JPY back towards 107.75, as the bulls continue to cheer the New York Fed’s clarification that President Williams’ comments were academic and not about immediate policy direction.

The US dollar collapsed across its main competitors in tandem with the Treasury yields in the US last session after the NY Fed President Williams’ comments remarks bolstered bets that the Fed would cut interest rates by 50 basis points, rather than 25 basis points.

However, the further upside looks elusive amid a lack of clarity on the US-China trade in-person trade meeting while escalating US-Iran geopolitical tensions also weigh on the risk sentiment that helps limit the downside in the safe-haven Yen. The Middle East tensions flared up again after the US Navy ship downed an Iranian drone in the Strait of Hormuz. However, the Iranian officials deny any such incident.

Further, looming July Fed rate cut also keep the dollar recovery in check, in turn loosening the bullish grip around the USD/JPY pair. The US dollar index stalled its bounce at 96.91, now trading around 96.80 region, almost unchanged on the day.

Markets now await the US Michigan Consumer Sentiment Index for the next direction on the prices. In the meantime, the pair will remain at mercy of the USD price-action and broader market sentiment.

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