USD/JPY extends the bounce to 109.65 amid risk reset

Risk sentiment continues to improve amid subsiding tensions over the North Korean missile threat, curbing demand for the safe-havens such as the Yen and hence, helping the USD/JPY pair to extend the bounce from four-month lows struck at 108.74 on Friday.

USD/JPY cheers risk-recovery

The Japanese stocks recover losses amid risk reset, while Treasury yields also stage a recovery from Friday’s downbeat CPI induced sell-off, offering the much-needed impetus to the spot.

Meanwhile, the Yen bulls failed to benefit from upbeat Japan’s Q2 GDP report, as easing US-North Korea geopolitical tensions weighed on the safe-haven Yen. The North Korean tensions seem to have subsided after the US Secretary of State and CIA Director Pompeo, both talked down the prospect of further conflict.

Looking ahead, further recovery in USD/JPY remains dependent on the USD recovery, as markets move past Friday’s poor US inflation data and look forward to the US retail sales and FOMC minutes due later this week for fresh trading impetus.

USD/JPY Technical levels                 

To the topside, a daily close above 10-DMA located at 110.00 would shift risk in favor of a re-test of 110.44/50 (20 & 100-DMA) beyond which 111 (round number) would be back on sight. A break below 109.19 (daily pivot) would open doors for 109.00 (classic S2/ Fib S3). A break lower would yield a test of 108.74 (multi-week lows).