USD/JPY gains limited by the 200-hour moving average and the 108.00 level
The pair is holding higher on the day after the yen weakened into the Tokyo fix earlier on but the move up in USD/JPY remains limited by the 200-hour MA (blue line) for now. That is preventing buyers from seizing near-term control of the pair.
Of note, there are also offers resting around the 108.00 handle keeping price action in-check with large expiries around $3.4 billion set to roll off on Wednesday likely to play a role in putting a cap on things over the next few sessions.
Beyond that, further resistance is only seen around 108.30-40 before further offers lie at 108.50 set to limit gains in the event price breaks higher.
But for now, with markets still in a tentative state awaiting for key central bank decisions, we may not see a whole lot of chasing and directional trading. The yen will be more affected by trade headlines but if anything else, just watch out for yields.
Treasury yields are closer to flat levels on the longer-end today but 2-year yields are up by 1.3 bps to 1.831%. That will be the spot to watch to determine any further movement in the yen as markets start honing their focus on the ECB and Fed decisions.
In the bigger picture with major central banks opting to ease policy further, I still reckon the yen has scope to gain considering why we’re seeing central banks around the globe choosing to do so. As such, the global slowdown will feed into worries surrounding the global economy and that’s a key reason that the yen (and gold) can bank on as bond yields become more depressed in the US and Europe.
The key spot to watch in that respect for USD/JPY is the June low of 106.78. If price starts chasing a move to the downside beyond that, it could be a slippery slope for the pair back towards the January flash crash lows.