USD/JPY refreshes session lows, retreats further below 110.00 handle

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   •  Risk sentiment took a sharp knock after the latest trade-related headlines.
   •  The global flight to safety underpinned the JPY and prompts fresh selling.
   •  Sliding US bond yields kept the USD on the defensive and did little to support.

The USD/JPY pair extended its intraday pullback from near two-week tops and was now seen retreating further below the key 110.00 psychological mark.

The pair initially built on last week’s goodish bounce from multi-month lows and added to Friday’s positive move, unaffected by upbeat Japanese Q1 GDP report. Bullish traders took cues from surprisingly positive outcome from Australian election and Indian election exit polls, albeit failed to capitalize on the early positive move amid reviving safe-haven demand. 

The early risk-on mood faded rather quickly on the back of news that China is considering suspending business with suppliers who agreed to halt supplying Huawei and may temporarily hike tariffs for Apple. The initial market reaction saw major European equity indices turn sharply lower for the day and benefitted the Japanese Yen’s relative safe-haven status. 

The global flight to safety was further reinforced by a modest downtick in the US Treasury bond yields, which kept the US Dollar bulls on the defensive and further collaborated to the pair’s intraday slide of around 40-pips to levels back below the 110.00 round figure mark.

It would now be interesting to see if the pair is able to attract any buying interest at lower levels or the current pullback marks the end of the recent corrective bounce amid absent relevant market moving US economic releases and ahead of the Fed Chair Jerome Powell’s scheduled speech during the early Asian session on Tuesday.

Technical levels to watch

As Yohay Elam, FXStreet’s own Analyst writes: “The Technical Confluences Indicator shows that USD/JPY has massive support around 109.80 where a dense cluster of levels awaits it. That includes the Fibonacci 161.8% one-month, the Bollinger Band 4h-Middle, the Simple Moving Average 200-1h, the Fibonacci 38.2% one-week, the Fibonacci 61.8% one-day, the Pivot Point one-day Support 1 and more. If it breaches this support region, the next significant support is at 109.09 where the Fibonacci 161.8% one-day and the PP 1m-S3 converge.” 

“Its initial upside target is 110.51 to 110.68 region where we note the SMA 100-4h, the SMA 100-1d, the PP 1w-R1, the PP 1d-R2, and the PP 1m-S1. Looking to higher ground, USD/JPY may target 111.42 where we note a confluence including the Fibonacci 61.8% one-month and the SMA 200-1d,” he added further.
 

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