• The USD/JPY pair has continued to consolidate at the upper end of its October range.
  • The major pair has been confined to familiar ranges soaking up the monumental risks in geopolitics.

USD/JPY is sitting ready for a busy week ahead having ranged between 108.50 and 108.77 last Friday's close. The major pair has been confined to familiar ranges soaking up the monumental risks in geopolitics. US yields have thus been a lesser influence as traders sit on the sidelines waiting for a crucial Federal Open Market Committee meeting, along with Chinese PMIs However, the US 2-year treasury yields rose from 1.58% to 1.62% on Friday while the 10-year yield rose from 1.75% to 1.80%. "Markets are pricing 22 basis points of easing at the 30 October meeting and a terminal rate of 1.26% (vs 1.88% currently)," analysts at Westpac noted.

Geopolitics in focus

Brexit has been the main focus of the market while the US negotiation headlines have been simmering away in the background with the latest being that the US-China talks have progressed very well, according to Trump, suggesting that a deal was close. 

"Treasury Secretary Mnuchin and USTR Lighthizer spoke with China's VP Liu He on Friday, and the statement from the US side said, "They made headway on specific issues and the two sides are close to finalizing some sections of the agreement. Discussions will go on continuously at the deputy level, and the principals will have another call in the near future." Trump called for Congress to pass the USCMA (US-Canada-Mexico) trade pact and said that China wants a trade deal,"

analysts at Westpac explained. 

USD/JPY levels

On a technical front, FXStreet Chief Analyst, Valeria Bednarik notes that the USD/JPY pair has continued to consolidate at the upper end of its October range. "In the daily chart, it remains above its 20 and 100 DMA, but below a directionless 200 DMA, which stands a few pips above 109.00. The Momentum indicator eases from overbought levels, while the RSI consolidates around 60, lacking clear directional strength but, given that they stand well into positive ground, leaning the risk to the upside. In the shorter term, and according to the 4-hour chart, the pair is neutral-to-bullish as it holds above a directionless 20 SMA, but with technical indicators still stuck to their midlines."

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