USD/JPY finds resistance at 107, still up more than 1% near mid-106s

The USD/JPY pair gained more than 150 pips in the hour following the United States Trade Representative's (USTR) announcement of the decision to delay additional tariffs on some of the Chinese imports including a variety of consumer electronics. However, after climbing higher toward the 107 mark, the pair retraced a portion of its recent upsurge and was last seen trading at 106.48, still adding 1.15% on a daily basis.

Minutes after China’s Ministry of Commerce said Vice Premier Liu He conducted a phone call with the USTR Lighthizer and Treasury Secretary Mnuchin, USTR's office said they will be delaying the 10% tariffs that had been scheduled to start next month until December 15. With the initial reaction, the 10-year US Treasury bond yield surged higher and was last up more than 2% on the day and Wall Street's main indexes rose sharply with the Nasdaq Composite rising as much as 2.5%.

Risk-on flows dominate markets

The improved risk sentiment weighed on traditional safe-havens such as the JPY and gold and caused them to suffer heavy losses against the USD. Furthermore, this development also ramped up the demand for the Greenback by weakening the probability of the Federal Reserve cutting rates more than once in the remainder of the year. The US Dollar Index rose to a six-day high of 97.80 and is now at 97.72, gaining 0.35% on a daily basis.

Despite this positive development, the latest headlines from Hong Kong hint at a further escalation of the situation with the riot police reportedly using pepper spray to push back protestors at the Hong Kong International Airport, not allowing investors to fully take advantage of the risk-on atmosphere.

Technical levels to watch for