USD/JPY: Bears dominate near 110.20 as Tokyo open responds to risk-off

  • Trade and politics continue to drive global risk sentiment.
  • Qualitative catalysts to dominate amid thin economic calendar ahead.

Be it trade negative news or political pessimism, the USD/JPY declines to 110.20 as Tokyo opens on Thursday.

With the US salvo add few more Chinese companies to its blacklist and turning down Beijing visit for trade talks, the US-China trade spat remained far from any solution and weakened market risk sentiment. China, on the other hand, used media to convey its fury over the Trump administration measures but refrained from retaliation.

Political plays at the UK were also in the spotlight after British lawmakers prepared for a coup to oust PM May over her failure to deliver good Brexit proposal.

Comments from the President of the St. Louis Federal Reserve James Bullard that the Fed may have overdone it with December hike and would not rule out a rate cut later in the year were also expected to weigh on prices.

The 10-year yield on the US government bond is considered a barometer of global risk sentiment. The gauge slipped four basis points (bps) on Wednesday and is nearly one basis point down to 2.386% during early Thursday.

The US Markit manufacturing and services purchasing manager index (PMI) for May, followed by April month new home sales, could offer directives to the quote in addition to political headlines during the rest of the day.

While manufacturing PMI is expected to inch down from 52.6 to 52.5, its services counterpart may improve to 53.2 versus 53.0 prior. Further, new home sales bears the consensus to flash 0.675 million marks compared to 0.692 million prior.

Technical Analysis

109.80 and current-month low near 109.00 seem nearby supports, a break of which can recall 108.50 on the chart.

On the flipside, 100-day simple moving average (SMA) near 110.55/60 may limit nearby advances ahead of fuelling the quote 111.00 and 200-day SMA level of 111.45/50.

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