USD/JPY analysis: holding just above a critical support
|USD/JPY Current price: 110.31
- Risk sentiment took a turn to the worst amid escalating US-Sino tensions.
- Japanese May, preliminary Nikkei Manufacturing PMI, foreseen at 50.5 vs. the previous 50.2.
The USD/JPY pair pulled back from the 110.66 weekly high set on Tuesday, finishing the day at around 110.25, amid renewed risk aversion coming from the US-China trade war front. Tensions between the two economies have escalated after the US government suggested it will ban business with more Chinese companies, later exacerbated by US Treasury Secretary Mnuchin, who said that there are no plans to go to Beijing to resume talks. He added that President Trump and his counterpart Xi-Jinping would likely meet by the end of June. The negative market sentiment weighed equities lower, dragging alongside the pair. US Treasury yields, on the other hand, remained little changed intraday, barely losing ground post-FOMC Meeting's Minutes. This Thursday, Japan will see the release of the May preliminary Nikkei Manufacturing PMI, foreseen at 50.5 vs. the previous 50.2.
The USD/JPY pair retreated to a critical level, the 61.8% retracement of the latest daily run at around 110.20, which holds for now. The risk of a bearish extension seems limited, as in the 4 hours chart, the pair is also holding above a bullish 20 SMA, which now converges with a mild-bearish 100 SMA at the current level, and as technical indicators bounced from their midlines, offering modest bullish slopes. Should the level give up, bears will try to push the pair toward 109.75, the next Fibonacci support, while beyond the mentioned weekly high, chances are back favoring an advance toward 111.25.
Support levels: 110.20 109.75 109.40
Resistance levels: 110.65 110.95 111.25
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