USD/JPY whipsawed price action developing in Tokyo

USD/JPY had switched back to the upside, taking on the end of Wall Street high but then turned lower again as volatility picks up. USD/JPY is currently trading at 108.20, between 108.12 and 108.23, up from 107.94. 

In recent trade, there was some attention given to North Korea on the news that two unidentified projectiles were fired into the East Sea as North Korea gets frustrated by lack of progress in talks with the US. The launch appears to resemble the May 2019 firing of two short-range missiles, which travelled approximately 260 miles and was fired from the Wonson area.

"Our military, in preparation for additional launches, is maintaining (its) readiness posture by monitoring related movements,"

an official in the South Korean Joint Chiefs of Staff office said.

However, in more recent trade, the risks have been dialled down:

Japanese government source: 'No impact on Japan's national security'

• Projectiles were two short-range ballistic missiles.
• Missiles did not reach Japan's Exclusive Economic Zone.
• No impact on Japan's national security.

Meanwhile, overnight, yields were a theme following a downturn in the Europen yields ahead of today's ECB meeting expected to be dovish. the US 2-year treasury yields initially dropped from 1.83% to 1.80%, steady at 1.82%, while 10-year yields fell from 2.08% to 2.04%. Looking ahead to the Federal Reserve, markets have priced in a 30bp of easing at the 31 July meeting (from 29bp the previous day).

Looking ahead, it is all about the US Gross Dometic Produce. However, ahead of that, we have the June durable goods orders and wholesale inventories data. "Core capital goods shipments – a proxy for business investment – are expected to decline 0.2% leaving the average for Q2 up 0.4% on the average for Q1," analysts at Westpac explained. 

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet, explained that the USD/JPY pair is holding just above the 50% retracement of the July’s decline, where it also has the 100 and 200 SMA in the 4 hours chart, with the indicators still directionless:

"The 61.8% retracement of the same slide continues capping advances, although the relevant resistance is the 108.40 region, where the pair topped for most of the previous week."

"Technical indicators in the mentioned chart hold into positive ground, having bounced just modestly from their midlines but currently lacking enough directional strength. The pair is short-term neutral and would need to advance beyond the mentioned resistance area to turn positive, while bulls’ chances would likely decline on a break below 107.90."