USD/JPY sticks to gains near multi-week tops, just above mid-110.00s

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   •  Gains traction for the second straight session amid the continuation of the recent USD rally.
   •  US-China trade optimism/risk-on mood dent JPY’s safe-haven demand and remains supportive.

The USD/JPY pair built on the overnight goodish up-move and climbed to over six-week tops, further beyond mid-110.00s on Tuesday.

Despite increasing chances of another partial US government shutdown, the US Dollar stood tall near 2019 high and was seen as one of the key factors driving the pair higher for the second consecutive session.

This coupled with renewed optimism over a possible resolution of the US-China trade disputes and the prevalent risk-on mood further dampened the Japanese Yen’s relative safe-haven status and remained supportive.

Investors’ risk-appetite got a boost following White House senior counsellor Kellyanne Conway’s comments on Monday, saying that the US President Donald Trump may still meet Chinese President Xi Jinping in the near future and that it looks like the US and China are getting closer to deal. 

Hence, this week’s high-level US-China trade talks, along with important US macro releases will play a key role in driving the broader market risk sentiment and eventually determine the pair’s next leg of a directional move.

In the meantime, today’s scheduled speeches by several FOMC officials, including the Fed Chair Jerome Powell will also be looked upon for some meaningful impetus and short-term trading opportunities.

Technical outlook

Omkar Godbole, FXStreet’s own Analyst and Editor explains, “a convincing break above the bearish 10-week MA of 110.57 may remain elusive, as the RSI on the hourly chart is beginning to diverge in favor of the bears. The RSI on the 4-hour chart is also reporting overbought conditions with an above-70 print.” 

“Put simply, the 10-week MA hurdle is likely to remain intact and the psychological support of 110.00 could be put to test again. The pair, however, could make a move above 111.00 by NY close if the yield differentials spike in the USD-positive manner,” he added further.
 

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