The USD/JPY currency pair failed to stop its previous day selling bias and dropped to a one-week low below 108.00 round-figure-mark, mainly due to the risk-off market sentiment underpinning the safe-haven Japanese yen and contributed to the currency pair declines. On the other hand, the broad-based U.S. dollar strength becomes one of the factors that is keeping a lid on any further losses in the currency pair, at least for now. At this particular time, the USD/JPY currency pair is currently trading at 107.97 and consolidates in the range between the 107.80 - 108.55.
However, the reason for the risk-off market sentiment could be attributed to the on-going tussle between the United States and China, as the United States policymakers pushing for the bill to sanction Chinese politicians, which also includes Xinjiang for human rights violation. Whereas, China also fueled the on-going conflict while ignoring the Trump administration's recent push to remove the punitive tariff on the American lobsters, which eventually exerted some downside pressure on the risk sentiment during the initial Asian on the day.
The heavy risk-tone was further bolstered by China's Ministry of Culture and Tourism warning against travel to Australia in the wake of the increasing racist attacks. On the flip side, the China-India war is getting worse and remains on the cards as China recently put the Rising Star in command of forces in border face-off against India.
As in result, the global equity markets took a breather after the recent strong rally and boosted the traditional safe-haven currencies, including Japanese yen. Whereas, the bearish traders further took cues from fresh declines in the U.S. Treasury bond yields, which contributed to the USD/JPY pair's downward trajectory.
At the USD front, the broad-based U.S. dollar remains bullish and draws bids at press time as investors awaiting the next moves from the U.S. Federal Reserve. The U.S. dollar gains were further bolstered by the risk-off market sentiment triggered by the escalation in geopolitical among the Korean neighbors. However, the bullish bias in the U.S. dollar became a key factor that kept a lid on any additional losses in the USD/JPY currency pair, at least for now. Whereas, the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.2% at 96.823, having dropped over 3% in the last month.
As in result, the U.S. 10-year Treasury yields fell 4-basis points (bps) to 0.844% while the stocks in Asia and the U.S. stock futures reported modest losses. At the data front, Japan's April month Labor Cash Earnings fell more than 0.6% forecast to -0.6%, as in result traders are cautious about placing any strong position ahead of May month preliminary Machine Tools Orders, previous -48.3%, from the Asian nation. Looking forward, due to the absence of major data/events from the U.S., markets traders will keep their focus on the qualitative catalysts for fresh impulse.
Daily Support and Resistance
S1 106.08
S2 107.43
S3 107.98
Pivot Point 108.78
R1 109.33
R2 110.13
R3 111.48
The USD/JPY pair has started closing neutral candles over 107.850 support areas, which may drive bullish correction. On the higher side, the USD/JPY prices have the potential to target the 108.500 level. The recent breakout of the upward channel is still suggesting bearish bias, but the sellers are exhausted now, and buyers may enter into the market to buy oversold currency pair. On the higher side, the USD/JPY may find resistance around the 108.500 level today. Coverversly, the bearish breakout of the 107.850 level can drive more sales until 107.130 level today. Good luck!