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USD/JPY muted in Tokyo following dollar's resurgence

8/8/2018, 10:58:51 AMMarket Analysis
USD/JPY muted in Tokyo following dollar's resurgence

The DXY rallied back to the highs within the following day's range: 94.9940-95.3680. The move was supported by the US 10yr treasury yields rising from 2.94% to 2.97% while the 2yr yields climbed from 2.65% to 2.67% - The Fed fund futures yields are pricing in almost two more full hikes in 2018 which underpins the dollar on the central bank divergences.

China/US trade risks shelved for now

Wall Street records solid gains boosted by energy and financials

China retaliated to the US verbally late yesterday via a newspaper report by the 'China’s People’s Daily' where the news declared the country won’t give in to “trade blackmail.” After already threating to place tariffs on $60 billion of American goods in retaliation to the proposals from the Trump administration to impose new levies on Chinese products.

Investors have become immune to the verbal tit for tata threats between the two largest economies of the world - instead, following a risk on session in Asia and European markets Wall Street sent the Dow Jones Industrial Average DJIA, higher for a third session, where the index was adding 126.73 points, or rose by 0.5%, to 25,628.91. In fact, the VIX was down to its lowest levels of 2018 at 10.97- Subsequently, USD/JPY climbed from 111 the figure and reversed back to 111.47 for the NY high before making a close of 111.37 in NY.

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the risk of further declines is still present, although the fact that the pair managed to recover above the 111.20 level gives bulls some hopes:

"In the 4 hours chart, the 200 SMA reinforces the mentioned static support, while the 100 SMA gains downward strength near 111.60, also a static resistance. Technical indicators in the mentioned chart have turned higher, now advancing within neutral levels, falling short of confirming further gains ahead."