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  • US dollar fails to extend gains versus the yen as recovery remains limited.
  • Yen continues to be supported by concerns around emerging-markets.

The USD/JPY pair peaked at 111.11 and a few minutes later pulled back below 111.00. Near the end of the US session was hovering around 110.90, modestly higher for the day but far from the highs.

The retreat of the pair took place despite renewed US dollar strength and following comments from US Treasury Secretary Steven Mnuchin. He mentioned that they were planning to impose new sanctions against Turkey. His words affected market sentiment and pushed US yields to the downside and strengthened the yen across the board. At the same time, the US Dollar Index printed a fresh daily high at 96.75.

Main stocks indexes remain near daily highs, consolidating strong gains. The Dow Jones is up 1.70% and the Nasdaq 0.70%. Regarding emerging markets, the improvement in risk sentiment eased during the US session, signaling that the negative tone still prevails and that could continue to offer support to the Japanese yen.

USD/JPY outlook

The pair is trading at the same level it closed last week. It rebounded from 6-week lows near 110.00 but the recovery initially found resistance at 111.40 and today the greenback showed difficulties holding on top of 111.00 showing lack of positive momentum. The downside also seems limited, so ahead of the Asian session a consolidating around current levels seems likely.

A break above 111.10, could open the doors to more gains and to a test of the weekly high. On the flip side, a consolidation below 110.50 could point to more losses. Support levels are seen at 110.25 and 110.05/10.