USD/JPY: Tokyo responds to change in risk sentiment by piercing 110.00 mark

With the Japanese traders responding to the recent shift in the US outlook towards China’s Huawei and a bit soft tone for Iran, USD/JPY is on the bids near 110.10 as Tokyo opens for trading on Tuesday.

The US Commerce Department announced a 90-day window to those doing business with China’s Huawei to have lesser hardships for domestic business. This seems to be a welcome sign for the US-China trade spat after the Trump administration previously banned the Chinese giant from its homeland.

A bit less harsh threats from the US President Donald Trump to Iran could also be considered as reasons for the improvement in risk sentiment.

On the other hand, the US Federal Reserve Chairman Jerome Powell didn’t give much information for future monetary policy nor for trade tension while emphasizing threats from business debt if it increases much.

Meanwhile, Japanese Finance Minister Taro Aso was also on wires, via Reuters, praising Japan’s fundamentals while conveying worries for capital expenditure at home and China’s slowdown.

Given the recent change in market risk-sentiment, global risk barometer, 10-year treasury yield from the US, remained mostly unchanged at yesterday’s positive closing near 2.41%.

Looking forward, the US existing home sales become the only economic data on the cards, which in turn highlights the importance of qualitative catalysts to determine near-term market sentiment. The housing market gauge may grow to 5.33 million from 5.21 million (MoM) in April.

Technical Analysis

Latest highs near 110.30 and 100-day simple moving average (SMA) around 110.50 seem adjacent upside caps for the quote’s rise, a break of which can escalate the recovery towards 50-day SMA level of 111.10.

On the flipside, 109.70 and 109.00 can limit the pair’s downside ahead of highlighting January-end low near 108.50.