USD/JPY reverses early dip, holds steady above mid-108.00s

• The recent USD bullish run got an additional boost from upbeat US Q2 GDP print.
• Trade optimism undermined JPY’s safe-haven demand and remained supportive.
• Investors now seemed reluctant ahead the central bank meetings – BoJ and the Fed.

The USD/JPY pair reversed an early Asian session dip and is currently placed at the top end of its daily trading range, around the 108.65 region.

The pair kicked off the new week on the defensive and pulled away from Friday’s 2-1/2 week tops, touched in the aftermath of upbeat US GDP growth figures for the second quarter of 2019. The latest US GDP report showed that the economy expanded by 2.1% annualized pace during the three months to June and further lowered chances of an aggressive interest rate cut move by the Fed.

The data lifted the US Dollar to a two-month high and assisted the pair to build on its recent positive momentum, albeit lacked any strong bullish conviction. Investors now seemed reluctant to place any aggressive bets and preferred to wait on the sidelines ahead of the central bank meetings – starting with the BoJ policy update on Tuesday and the highly anticipated Fed decision on Wednesday.

Ahead of the key event risks, the prevalent cautious mood underpinned the Japanese Yen’s safe-haven demand and exerted some downward pressure at the start of a new trading week. The downside, however, remained limited amid some renewed optimism over a possible resolution to the prolonged US-China trade dispute.

With investors still awaiting fresh trade-related updates, it will be prudent to wait for a sustained move in either direction before traders start positioning for any meaningful intraday momentum amid absent relevant market-moving US economic releases on Monday.

Technical levels to watch