USD/JPY drops to fresh 24-week low as risk aversion holds the spotlight

FOMC-led USD declines persist with the week-start sluggish US data.
Despite likely end to the trade negotiation deadlock, the US-China talks aren’t expected to offer any breakthrough.
Iran continues to undermine the US authority despite the latest sanctions from the Trump Administration.

Anil Panchal FXStreet

Be it the latest downbeat print of the US activity data or the US-Iran tension, not to forget uncertainty surrounding the G20, risk aversion holds the spotlight.

As a result, safe-havens like Gold and the Japanese Yen (JPY) are on the buying spree, which in turn drags the USD/JPY pair to a fresh 24-week low of 106.78 before recovering to 106.93 heading into the European session on Tuesday.

The Dallas Fed Manufacturing Index was the latest disappointment to the US Dollar (USD) buyers as the activity gauge slumped to the mid-216 low on Monday. Adding to the greenback weakness could be the US President Donald Trump’s criticism of the Federal Reserve’s monetary policy.

Further, the US and Chinese Presidents are less likely to deliver any breakthrough during their trade talks at the G20 as respective media kept spicing the differences over their ideology.

On the other hand, Iran refrains from respecting the US authority and shuts down odds for any talks with the global leader after it levied fresh sanctions on the Arab country.

Additionally, Chinese policymakers were also on the wires favoring future monetary easing to confront global pessimism due to the US-led trade protectionism.

It should also be noted that the global risk gauge, the US 10-yaer treasury yeild, continues to inch closer towards breaking 2.0% mark by the press time.

Looking forward, speech from the US Federal Reserve Chairman Jerome Powell will be closely observed to get the clues of future monetary moves whereas second-tier data from the US and Japan could also grab the market attention.

Technical Analysis

Early month low around 107.80 acts as an immediate resistance to trigger the fresh leg up toward 21-day simple moving average (SMA) level near 108.30. Meanwhile, mid-April 2018 low near 106.60, followed by 105.70, might please bears during further declines.

1. R3 107.77
2. R2 107.65
3. R1 107.48
PP 107.36
1. S1 107.18
2. S2 107.07
3. S3 106.89

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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