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  • USD/JPY erases gains, trades neutral amid broad USD weakness and trade optimism.
  • Markets turn cautious ahead of the US CPI data and US-China trade talks.

The USD/JPY pair is holding the lower ground just below the 107.50 level, as the safe-haven Yen is seen gaining some ground, with a cautious mood setting in ahead of the key US-China high-level trade talks.

Trade talks’ outcome to determine the sentiment in the coming days

The spot shaved off the early Asian gains and hit fresh session lows at 107.36 last hour, in response to broad-based US dollar weakness amid the latest positive development on the trade front. Meanwhile, markets turn jittery and refrain from placing any big bets on the major, awaiting further developments on trade.

The latest Bloomberg report that cited the White House is considering rolling out a previously agreed currency pact with China as part of an early partial deal boosted the risk sentiment in Asia, driving the prices higher in tandem with the US equity futures and region equities. USD/JPY rallied hard and gained nearly 70-pips on the trade optimism. Also, the Huawei news added to the upside momentum in the major.

Looking ahead, a sense of caution will prevail, favoring the JPY bulls somewhat, as next of relevance remains the US CPI data. However, the trade updates will continue to influence the risk flows and in turn the anti-risk/ safe-haven Yen in the session ahead.

USD/JPY Technical levels to watch