USD/JPY: Soft Brexit supports renewed risk-on sentiments
|- The USD/JPY is trading little changed at around mid 109s as the market is awaiting fresh impulses from Brexit deal debate and the FOMC meeting on Wednesday.
- Falling corporate profits weigh on market sentiment with traditional safe havens benefiting from risk-off.
- The Brexit deal debate as a major risk factor is expected to provide fresh clues as the UK House of Commons is set to vote on amendments to Brexit deal.
The US Dollar is trading little changed around 109.50 level against the Japanese Yen on Tuesday as the market is waiting for the fresh impulse for Brexit deal debate in the UK parliament later today and the Fed meeting scheduled for Wednesday.
While the US prosecutors' allegations on China's smart-phone giant, Huawei Technologies Co., pulled the Japanese Yen (JPY) back from 109.50 against the US Dollar on Monday, optimism surrounding soft Brexit triggered USD/JPY upswing from 109.10 towards 109.40 during early European sessions on Tuesday.
American prosecutors filed criminal charges against Huawei Technologies Co. alleging them for stealing trade secrets from their US rivals and also for bank fraud by conducting business with Iran and violating the US sanctions. The news gave another blow to the US-China trade talks that are scheduled for the next two days as the world's two largest economies are at loggerheads on this point since long. With this, the Japanese Yen often considered a safe haven appreciated against its US counterpart by the yesterday close. Additionally, US-Venezuela crisis and sluggish results from Caterpillar and Nvidia Corp also pushed investors to traditional risk safeties like the JPY and the Gold.
The risk-off mood couldn't last long on Tuesday when the UK’s House of Commons holds a debate on Theresa May's Plan B. At the start of discussions Democratic Unionist Party (DUP) reacted positively to the May's proposal to replace backstop arrangements near Northern Ireland border with alternative plans. The same offered additional weakness to chances concerning no-deal Brexit and triggered risk-on around early UK timings.
Going forward, the UK Prime Minister Theresa May is still struggling to get support for her Plan B as it lacks clarity over major issues, including Irish border, which DUP might not favor for long.
Technically, the USD/JPY needs to overcome 109.80-90 horizontal area, including highs marked recently, in order to aim for the 110.25 resistance. In case the pair falls short of clearing the 109.95 resistance, chances of its pullback to the 109.10 and then to the 108.60 can't be denied.
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