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USD/JPY: Rebound still capped near 105.60 as trade jitters weigh

  • USD/JPY tested 7-month lows near 105.30 amid escalating US-China trade row.
  • Lower Yuan fix, fresh Treasury yields weakness add to the JPY strength.
  • The spot awaits fresh trade-related news, key US data for fresh directives.

Having found fresh support near the seven-month low of 105.27 in early Asia, the USD/JPY pair attempted a recovery above the 105.50 level, only to run through offers near 105.60 region. At the time of writing, the major is seen consolidating the latest move higher just below the midpoint of the 105 handle amid holiday-thinned trading and a lack of fresh US economic data.

USD/JPY: Downside looks more compelling

Despite the choppy trades over the last hours, the bid tone around the Yen remains intact, as heightening US-China as well as South Korea-Japan trade tensions continue to fuel the demand for the anti-risk JPY. Markets remain cautious ahead of likely US-China trade talks next month and amid the latest comments from the US President Trump.

Trump tweeted out on Saturday, “China wants to make a deal so badly. Thousands of companies are leaving because of the Tariffs, they must stem the flow. At the same time China may be hoping for a Democrat to win so they could continue the great ripoff of America, & the theft of hundreds of Billions of $’s!”

Further, the South Korean Industry Ministry’s exclusion of Japan from its white-list (preferred trade list) amid Japanese export control row also hurt the market sentiment, rendering JPY-positive. Moreover, the renewed weakness in the Treasury yields across the curve also keep any upside attempts in the spot capped while the US dollar index trades modestly flat around 97.50 levels.

Looking ahead, the pair will continue to remain at the mercy of the broader market sentiment, awaiting fresh Trump’s comments, trade developments and a spate of key US economic data. The US CPI, UoM Consumer Sentiment and Retail Sales will hog the limelight later this week.

USD/JPY Technical Levels

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