USD/JPY downside playing out in Asia, technical indicators remain within negative levels
|- USD/JPY: Bears staying in control in the Asian session.
- USD/JPY4-hour chart: The pair is also at risk of extending its decline,
USD/JPY has lost some ground as the yen takes up another bid while geopolitics keep the yen bulls in business ahead of a key week on the US calendar. On Friday, the dollar ended up pretty much flat but had shown its hand to the downside, all the way to test the 97 figure in the DXY. However, coming to the rescue were slight recoveries in US yields. The US 2-year treasury yields rose from 1.59% to 1.65%, the 10-year yield from 1.70% to 1.74%. Meanwhile, markets are pricing 29bp of easing at the 19 September Fed meeting.
As trade wars and various geopolitical instabilities keep the carry trades on the backfoot, reverting an interest into the likes of the euro, CHF and Yen, markets will be getting back to fundamentals this week where US data will take the limelight. We have a series of Federal Reserve related events that will include Fed speakers, The Jackson Hole and the Federal Open Market Committee Minutes, US Consumer Price Index and Retail Sales will also be highlighted.
Fed events to clarify the path forward
"Recent escalation in US/China trade talks and the tightening in financial conditions have placed the Fed in a tight spot. With its reaction function closely tied to global "crosscurrents", we expect communication though the Minutes and J. Hole symposium to attempt to clarify the path forward. While Fedspeak should support near-term easing, the market is more than priced for it," analysts at TD Securities argued.
USD/JPY levels
Valeria Bednarik, the Chief Analyst at FXStreet explained that the USD/JPY pair has room to extend its decline according to the daily chart:
"Technical indicators continue heading south within negative levels, as the pair develops below all of its moving averages and with the 20 DMA accelerating lower below the 100 and 200 SMA. In the shorter term and according to the 4 hours chart, the pair is also at risk of extending its decline, as, despite bouncing, technical indicators remain within negative levels. The 20 SMA caps the upside with a bearish slope at around 106.05, with a correction likely on an advance beyond this last."
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