USD/JPY: Bulls in control with eye on the 107 handle

  • USD/JPY holds on the 106 handle as a return of risk props up the pair.
  • Technical indicators in the mentioned time-frame remain within positive levels.

USD/JPY holds in the newly acquired 106 territories, boosted again overnight in a risk-on environment where US stocks moved sharply higher. Trump announced that restrictions on Huawei operations would be delayed 90 days, giving US telecom companies more time to untangle their systems from reliance on the company’s technology. This, however, followed weekend comments from Trump over twitter warning that it would be difficult to reach a trade deal if China “did something violent” in Hong Kong.

The Dow Jones Industrial Average DJIA, +0.96% rose around 250 points, or 1%, to end near 26,136, according to preliminary figures, while the S&P 500 SPX added 35 points, or 1.2%, to close near 2,924. The Nasdaq Composite put on around 107 points to end the day near 8,003, a gain of 1.4%.  The US dollar was broadly stronger, supported by higher yields. The Washington Post reported that the White House was considering cutting the payroll tax to stimulate growth. USD/JPY rose from 106.30 to 106.70. 

Fed president Rosengren advocating for the Fed to pause 

Boston Fed president Rosengren who dissented against the rate cut in July, advocating for the Fed to pause at this stage, bullish on the US economy and showing little concern for overseas doom and gloom. In turn, US 2-year Treasury yields climbed from 1.50% to 1.55% while the 10-year yield rose from 1.58% to 1.61%. Still, markets expect a rate cut as soon as September - " Markets are pricing 29bp of easing at the 19 September Fed meeting, and a terminal rate of 0.97% (Fed funds rate currently 2.13%)," analysts at Westpac explained. 

USD/JPY levels

Valeria Bednarik, the Chief analyst at FXStreet explained that the USD/JPY pair hast spent the last American session consolidating gains in the 106.50/60 region, maintaining a neutral stance in the short term:

"In the 4 hours chart, the 20 SMA has turned flat below the current level, while the 100 SMA maintains its bearish slope, approaching the mentioned Fibonacci resistance. Technical indicators in the mentioned time-frame remain within positive levels, lacking directional strength and off their daily highs."

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