USD/JPY: Bulls holding for o the 105 handle, testing 106 level in Tokyo
|- USD/JPY testing the 106 handle ahead of Han Seng open - predicted to open down 2%.
- USD/CNY fix gives some short-term relief to risk
USD/JPY has fallen to fresh lows since yesterday on Dollar weakness and risk-off flows. However, USD/JPY has started to stabilise and has tested the 106 handle in Tokyo. Volatility is high as geopolitical take a grip and send the markets fear gauges to the highest levels since Dec 2018 stock market's rout. The US treasury called out the Chinese as currency manipulators which are causing quite a stir in the markets.
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The Dollar was weaker on a drop in US yields and the stock markets falling over again. The US 2-year treasury yields fell from 1.70% pre-CNY move to 1.57% (lowest since Nov 2017), the 10-year yield fell from 1.85% to 1.71% (lowest since Nov 2016). The Federal Reserve is now expected to cut rates again as soon as September and analysts at Westpac explained that "the markets are pricing 34bp of easing at the 19 September meeting, and a terminal rate of 1.00% (implying 115bp further easing expected in total)."
USD/CNY fix lower than yesterday's close
The yen rallied on the headlines as USD/CNH moved higher to 7.14 following yesterdays fix above 6.90. Today, the People's Bank of China has fixed USD/CNY at 6.9683 vs yesterday's close of 7.0498. This has sent USD/CNH lower to 7.09 on the knee-jerk but Yaun weakness is here to stay as one of the tools the Chinese can use vs the US's imposing of tariffs on Chinee imports. The next risk for the pair will be the Han Seng open - predicted to open down 2%.
USD/JPY levels
Valeria Bednarik, the Chief analyst at FXStreet explained that the USD/JPY pair hold has met selling interest at around 106.34 on an intraday attempt to regain the upside, maintaining the negative stance according to intraday technical readings, as it held near its lows as indicators corrected extreme oversold conditions. In the 4 hours chart, the 20 SMA extended its vertical slump below the larger moving averages and above the current level, currently at around 107.40. Indicators have recovered from their lows, but remain within oversold levels, keeping the risk skewed to the downside as long as it remains below the daily high of 106.67.
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