USD/JPY: Bulls reasurting themselves above key support

USD/JPY has started out in Asia for the week a touch higher as sentiment for trade talks remains on track, if not a little delicate following Friday's comments from US President Trump who has signalled a lack of a sense of urgency to secure a deal before the US Presidential elections in the Autumn of 2020. USD/JPY is currently trading at 107.74, + up 0.20% having travelled from a low of 107.60 to a high of 107.75. 

Last Friday, USD/JPY was falling from 108.00 to 107.53 before reasserting itself on weekend news that came in the assurance from Chinese officials that trade talks will continue in October, despite the abrupt departure of the negotiation team from the US on Friday.

Fed chat taking the spot light

Elsewhere, we had Fedspeak that came from Bullard (dove) and Rosengren (hawk) who, as analysts at Wetapc explained, "released rationales for their dissents at last week’s FOMC meeting. Vice-Chair Clarida ploughed the middle ground in line with the FOMC’s statement and clarified their concerns via the provision of insurance in the latest cut, the sound resilience of the US economy, but the weakness of the global environment. Countering Rosengren’s concerns, Clarida stated that there were no signs of elevated financial instability."

As for US yields, the 2-year treasury yields dropped from 1.75% to 1.68%, while the 10-year yield slid from 1.79% to 1.72%. "Markets are pricing 26bp of easing by year-end, and a terminal rate of 1.22% (Fed funds rate currently 1.88%)," analysts at Westpac noted. 

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet notes that the USD/JPY pair has settled a handful of pips above a critical Fibonacci support at 107.45, the 61.8% retracement of its August decline:

"The pair has been developing above the level for two consecutive weeks, with approaches to it attracting buying interest. That said, a break below the level will likely imply further slides ahead. In the daily chart, the pair is now below a bearish 100 DMA but still holding above a bullish 20 SMA, while technical indicators continued retreating from overbought readings, maintaining their downward slopes but above their midlines. In the 4 hours chart, however, the bearish potential is stronger, as technical indicators head firmly south well into negative ground, while the 20 SMA began turning lower above the current level."