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  • Positive trade-related development provided a modest lift in the last hour.
  • A weaker tone surrounding the USD kept a lid on any strong follow-through.
  • Wednesday’s key focus will be on Powell’s speech ahead of FOMC minutes.

The USD/JPY pair jumped to fresh session tops in the last hour, albeit struggled to make it through the 107.40-45 supply zone and quickly retreated few pips thereafter.
Having shown some resilience below the 107.00 handle, the pair managed to regain some positive traction on Wednesday and got an additional boost from reports that China is still open to agreeing on a partial trade deal with the US despite the recent development.

Renewed trade optimism supportive

It is worth reporting that the US decision to blacklist eight Chinese companies over the treatment of Muslim minorities in the western province of Xinjiang, together with imposing visa restrictions on Chinese officials had threatened to derail already delicate trade talks.
The latest positive trade-related headlines lifted the global risk sentiment, which was evident from a strong rally across equity markets and reinforced by an intraday turnaround in the US Treasury bond yields. This eventually weighed on the Japanese Yen’s safe-haven status and remained supportive.
Despite a goodish pickup in the US bond yields, the US Dollar struggled to gain any meaningful traction and turned out to be one of the key factors that kept a lid on any strong follow-through move up ahead of Wednesday’s important release of the minutes of the latest FOMC policy meeting.
Heading into the key event risk, the Fed Chair Jerome Powell’s scheduled speech will be closely scrutinized for clues about the central bank’s polity and produce some short-term trading opportunities later during the early North-American session.

Technical levels to watch