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  • Yen recovering ground as US-North Korea tensions persist.
  • USD/JPY looks to hold the 109 handle amid firmer DXY, Treasury yields.

The USD/JPY pair turned positive for the first time in four trading sessions and bounced sharply to test the 109.75 region, before reversing towards the midpoint of the 109 handle, where it now wavers.

The Yen slipped from two-week highs versus its American counterpart earlier today after a bout of risk-recovery was witnessed, as tensions between the US and North Korea appeared easing, with the North saying that it’s still open to resolving issues with the US.  On Thursday, the US President Trump called off a June summit with the North Korean leader, Kim Jong Un, re-igniting geopolitical tensions.

However, markets still remain cautious amid ongoing worries over global politics, with the safe-haven bids for the Yen likely to be underpinned across the board. Hence, the Japanese benchmark index, the Nikkei 225 index, is also seen paring back gains to now trade modestly flat around 22,460 levels.

Meanwhile, the downside appears limited amid broad-based US dollar strength and positive tone seen around Treasury yields, as the focus shifts towards the US durable goods, revised UoM consumer sentiment data and Fed Chair Powell’s speech for fresh trading impetus.

USD/JPY Technical Levels

Omkar Godbole, FXStreet’s Analyst, writes: “The pair has found acceptance below the key ascending trendline and the 200-day moving average. The 14-day relative strength index (RSI) dipped below 50.00 (in the bearish territory) yesterday. The 5-day MA has rolled over in favor of the bears. The chart also shows a 5, 10-day MA bearish crossover and 5, 200-day MA bearish crossover.”

“Thus, the pair looks set to test immediate support at 108.81 – 38.2% Fib R of 104.63-111.40 and could possibly drop further to 108.64. A daily close below 108.64 would confirm a bullish-to-bearish trend change. On the higher side, only a daily close above the 200-day MA of 110.18 would abort the bearish view,” Omkar adds.