- USD/JPY lacked any firm intraday direction ahead of the Christmas break.
- Concerns over the US-China relations benefitted the JPY’s safe-haven status.
The USD/JPY pair extended its sideways consolidative price action through the Asian session on Tuesday and remained confined in a narrow trading band, just below mid-109.00s.
Contradictory developments around the US-China relations kept a lid on the recent optimism led by an interim trade agreement between the world’s two largest economies and held investors from placing any aggressive bets. This eventually turned out to be one of the key factors that led to subdued trading ahead of the Christmas break.
It is worth recalling that the US President Donald Trump said over the weekend that the US and China would sign their so-called phase one trade pact very shortly. Adding to this, China announced on Monday that it would lower import tariffs from January 1 on around 850 US products – ranging from frozen pork to some type of semiconductors.
As the US-China trade tension subsided, China’s criticism that the US is interfering in its internal matters related to Hong Kong and Taiwan resurfaced concerns about a fresh conflict and extended some support to the Japanese yen’s perceived safe-haven status. However, a modest US dollar uptick helped limit any further downside, at least for the time being.
Given that while the US markets will close earlier on the back of Christmas Eve, liquidity is expected to remain low, which might further contribute towards limiting any meaningful intraday momentum for the major amid absent relevant market moving economic releases.
Technical levels to watch
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