USD/JPY: better bid over risk-on Wall Street, upside favoured above 111.50

  • USD/JPY: bulls and bears tug over the 111 line but bulls have the edge on a fundamental and technical basis.
  • Should the trade spat between China and the US actually start to diminish, that may put the breaks on the dollar in the near term.

USD/JPY has been less perky in the Tokyo open that what we were seeing in overnight markets since yesterday's US/China trade headlines which brought about some relief in the ongoing trade war saga that has otherwise been keeping a lock on caged-up bulls. Currently, USD/JPY has been oscillating around 111 the figure having made an Asian high of 111.21 and a low of 110.83.

USD/JPY has certainly attracted some attention over the last 72 hours. We had that big sell-off midweek from 111.40 where the drop was picked up 100 pips lower. There has been plenty of negativity out there but the greenback is picking up the safe haven bid when the broader risk is taken into consideration being the undercurrent of EM risks and a dollar shortfall offshore.

The greenback is a two-sided coin 

However, should the trade spat between China and the US start to diminish, that may put the breaks on the dollar in the near term as risks of import tariffs would otherwise likely fuel inflation at the same time the Fed is in the midst of a rate hike cycle. However, the very fact that the Fed is raising rates gives the dollar the edge and the offshore shortfall will keep the greenback underpinned for the foreseeable future. USD/JPY Continues to find support against 110.00-50 and while holding there, the risk profile favours the upside. 

USD/JPY levels

Valeria Bednarik explained that the 4 hours chart reflects that markets players are unwilling to move away from the safe-haven yen, but there's a certain balance in it amid dollar also considered a refugee:

"Sellers were quick around a flat 100 SMA, offering a dynamic resistance around 111.20, while despite posting modest recoveries, technical indicators are still stuck to neutral readings. The pair would need to clear the 111.50 price zone to be able to extend its advance with a firmer upward potential."

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