USD/JPY analysis: risk switch turns off and on, yen follows

Valeria Bednarik FXStreet

USD/JPY Current price: 108.46

Japanese trade balance deficit is seen at ¥-979.2B, amid a sharp drop in exports expected.
US Treasury yields bounced with trade war headlines after touching fresh multi-month lows.

The USD/JPY pair fell to 108.05 a fresh weekly low early in the US session, undermined by dominant risk aversion. US Treasury yields dragged the Yen higher, as the yield on the benchmark 10-year note fell to its lowest in almost two years, flirting with 2.02% for the first time since September 2017. However, both US Treasury yields and USD/JPY bounced sharply following news that US President Trump will be meeting with his Chinese counterpart Xi-Jinping at the G-20 summit next week. Trump tweeted that he had a 'very good telephone conversation with President Xi,' adding that their respective teams will begin talks before their meeting. The USD/JPY pair peaked at 108.67, once again meeting sellers around the critical resistance area, ending the day little changed around 108.40. Japan will start its macroeconomic week early Wednesday releasing May's trade data. The Merchandise Trade Balance is foreseen posting a deficit of ¥-979.2B, amid a sharp drop in exports, seen down by 7.7%.

Technically, the pair remains without signs of directional progress, although the bearish case is firm in place in the daily chart, with a bearish 20 DMA capping the upside around a Fibonacci resistance at 108.90. Shorter term, and according to the 4 hours chart, the neutral stance persists, as technical indicators have turned marginally higher but hold within neutral levels, while the price keeps hovering around a flat 20 SMA, and contained by a bearish 100 SMA.

Support levels: 108.30 108.05 107.85

Resistance levels: 108.90 109.20 109.50

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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