- Reviving safe-haven demand benefitted the JPY and exerted some follow-through pressure.
- A modest USD rebound helped bounce off lows ahead of the latest FOMC meeting minutes.
- A sustained move beyond 109.00 handle (200-DMA) needed to confirm near-term bullish bias.
The USD/JPY pair reversed an early dip to near one-week lows and is currently placed near the top end of its daily trading range, just above mid-108.00s.
The pair extended this week’s pullback from levels just above the 109.00 handle and witnessed some follow-through selling during the Asian session on Wednesday amid persistent US-China trade uncertainty, which was seen benefitting the Japanese yen’s perceived safe-haven status.
Trade developments, FOMC minutes in focus
In the latest trade-related development, the US President Donald Trump on Tuesday warned of more tariffs on China if negotiations failed. Adding to this, the US Senate passed a bill aimed at protecting human rights in Hong Kong and might further fuel tension between the negotiating parties.
The lack of clarity on the US-China trade talks triggered a fresh wave of the global risk-aversion trade, which was further reinforced by a sharp fall in the US Treasury bond yields and further collaborated to the pair’s slide, albeit a modest US dollar rebound helped limit any deeper losses.
Heading into Wednesday’s key event risk, the release of the latest FOMC monetary policy meeting minutes, traders also seemed reluctant to place any aggressive bets, rather preferred to lighten the bearish bets and led to the pair’s modest intraday recovery of around 20 pips from daily lows.
It, however, remains to be seen if the pair is able to capitalize on the attempted bounce or continues with its struggle to make it through the very important 200-day SMA barrier, near the 109.00 handle, which should act as a key pivotal point for short-term traders.
Technical levels to watch
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