Allan von Mehren, Chief Analyst at Danske Bank, assessed the recent price action around the pair.
“USD/JPY dropped below 108.20 driven by USD weakness on the back of EUR/USD buying related to the ECB meeting and as North Korean woes continues to weigh on risk sentiment and USD/JPY”.
“At the time of writing, the cross has stayed above our long USD/JPY position’s stop loss level at 108. However, further USD/JPY selling pressure ahead of North Korea’s foundation day tomorrow could push the cross below 108 today”.
“Previously, we have seen strong local demand below 108, but given the high uncertainty due to the US-North Korean tensions, the cross could fall substantially from here if the crisis escalates”.
“Meanwhile, the three-month suspension of the US debt ceiling has improved the prospect of a higher USD/JPY near term, However, North Korea will continue to dominate USD/JPY price actions”.
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