Technical Analysis

USD/JPY faces light pressure amid cautious risk sentiment

USD/JPY trades lower near 109.40 currently


The move higher earlier managed to hold above the 100-hour MA (red line) momentarily but as risk sentiment changed course, sellers regained near-term control of the pair. Currently, they are testing a break back under the broken trendline resistance as markets stay cautious in European trading so far.

US 10-year yields are down by more than 2 bps now to 2.389% and that’s helping to weigh on yen pairs. The drop in Italian bank stocks due to rising BTP yields also helped to precipitate a move lower across European equities and that in turn is contributing to the cautious mood we’re seeing this morning.

It’s still all about risk sentiment for USD/JPY so look towards US equities for more clues in trading today. As for key levels to watch out for, buyers will have to reclaim some control first by holding a firm break above the 100-hour MA and 109.70 before returning towards a test of the 110.00 handle.

Meanwhile, sellers will continue to eye the 109.00 handle as the next key level as they seek an extension to the downside. But for trading in the next few hours, just take note that there are large expiries rolling off in the pair around 109.40-50 today so that could help keep price action contained for the time being.

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