USD/JPY: bulls committing to the 106 handle ahead of FOMC
- USD/JPY was mixed overnight, with the yen picking up some safe-haven demand.
- USD/JPY: awaits FOMC outcome, political concerns clouding out-look.
USD/JPY has started out on Tokyo better bid, moving back onto the 106 handle and recovering from a dip below the handle. Currently, USD/JPY is trading at 106.02, down -0.07% on the day, having posted a daily high at 106.11 and low at 105.93. Markets were heavy overnight with a sell-off in the equity's space. Markets are instead concentrating on the political uncertainties in Washington and the subsequent concerns over Trump’s trade policies that could be negatively impacting the U.S. economy - hence yen turns bid on safe-haven demand.
Equities turn ugly on Wall Street
The DJIA fell 335.60 points, or by 1.4%, to close at 24,610.91 with all components, except Boeing Co. closing in the red. We also had Facebook’s worst drop in nearly four years after a public outcry over its management of third-party access to users’ information which hit the technology sector. The risk-off tone and moves lead to a jump in the VIX that gained around 38% and rallied 6 points, to 21.82 to above its long-term average of 20.
In the New York session, the yen picked up demand as equities dumped. However, with sterling better bid and the euro pretty firm, the crosses took some of the wind out of the yen's sails and the dollar managed to climb from 105.78 the low to 106.15 the high for a 106.03 close. However, the key this week will be the FOMC outcome where markets are expecting another incremental hike of 25bps. However, with all the political uncertainties and trade war noise, yields were off with the US 10yr treasury yields slipping from 2.87% to under 2.84% and the 2yr yields were unchanged at 2.30% for the day.
USD/JPY levels
Valeria Bednarik, chief analyst at FXStreet explained that the pair is still bearish according to short-term technical readings:
"In the 4 hours chart, an early spike met selling interest around a modestly bearish 100 SMA, while technical indicators were rejected from their mid-lines, although are currently heading nowhere right below their mid-lines."