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  • Renewed US-China trade optimism provided a goodish lift on Wednesday.
  • The momentum faltered near 100-day SMA amid a subdued USD demand.
  • Kuroda’s comments failed to influence or provide any meaningful impetus.

The USD/JPY pair edged lower through the Asian session on Thursday and eroded a part of the previous session’s strong bullish move to weekly tops.
 
Following the recent corrective slide from multi-week tops, the pair caught some aggressive bids on Wednesday and snapped four consecutive days of losing streak amid a strong pickup in the US Dollar demand. Despite the launch of a formal impeachment inquiry against the US President Donald Trump, renewed optimism over a possible resolution to the prolonged US-China trade dispute provided a goodish lift and assisted the greenback to post its biggest daily gains in three months.

Trade optimism remained supportive

Hopes of a meaningful progress on the US-China trade deal reignited on Wednesday after Trump told reporters in New York that both the sides are having some very good conversations on trade and an agreement could happen sooner than anyone thinks. The comments sparked a fresh wave of risk-on trade and led to a dramatic intraday turnaround in the US equity markets, which eventually dented the Japanese Yen’s safe-haven status and remained supportive of the pair’s move up.
 
The positive momentum, however, lacked any strong follow-through, rather stalled near the 100-day SMA resistance on Thursday in the wake of a subdued USD demand amid a modest pullback in the US Treasury bond yields. This coupled with not so dovish comments by BoJ Governor Kuroda, saying that gradual uptrend in wages is likely to accelerate inflation towards 2% gradually extended some support to the Japanese Yen and further collaborated towards capping gains for the major.
 
In absence of any major market-moving economic releases from the US, it will be interesting to see if the pair is able to attract some dip-buying interest at lower levels or the current pullback marks the resumption of the recent corrective slide. In the meantime, the USD price dynamics and the broader market risk sentiment might continue to produce some meaningful trading opportunities on Thursday.

Technical levels to watch