USD/JPY sticks to modest gains above 110.00 handle, but lacks follow-through

Haresh Menghani FXStreet

• Improving risk-sentiment undermines JPY’s safe-haven and helped regain traction.
• The USD remains depressed and fails to provide any meaningful bullish impetus.
• Traders now eye US economic data for some short-term trading opportunities.

The USD/JPY pair regained some positive traction on Tuesday, albeit continued with its struggle to build on the momentum further beyond the 110.25 region.

After yesterday's good two-way price moves within a broader trading range around the key 110.00 psychological mark, a combination of supporting factors helped the pair to catch some fresh bids during the Asian session and recover further from six-week lows.

A slight improvement in the global risk sentiment, as depicted by a positive trading mood across equity markets, dented the Japanese Yen's relative safe-haven status, which coupled with a follow-through uptick in the US Treasury bond yields remained supportive.

However, fresh concerns over lower US economic growth, sparked by inversion of the 3-month and 10-year Treasury yields for the first time since 2007, kept the US Dollar bulls on the defensive and turned out to be the only factor keeping a lid on any further up-move.

As Omkar Godbole, FXStreet's own Analyst and Editor writes: “The spread between the US and Japanese two-year government bond yields has narrowed in the USD-negative manner to 244 basis points, the lowest level since April 2018. The benchmark yield spread has also narrowed to 250 basis points.”

Moving ahead, today's US economic docket, featuring the housing market data - housing starts & building permits, followed by the Conference Board's Consumer Confidence Index, will now be looked upon for some fresh impetus later during the early North-American session.

Technical outlook

“Both the 8-hour and daily charts are biased toward the bears. Therefore, the diamond pattern seen in the chart could be breached to the downside. That will likely end up accelerating the preceding bearish move toward 109.50,” Omkar added further.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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