The USD/JPY pair reversed a weekly bearish gap, with bulls now trying to build on the momentum back above the key 110.00 psychological mark.
The US Dollar continues to be weighed down by increasing risk of a full-blown global trade war, especially after the US President Donald Trump withdrew from the endorsement of the joint G7 statement, which led to the weekly bearish gap opening on Monday.
The pair, however, regained positive traction and seemed to track a goodish pickup in the US Treasury bond yields. In fact, the benchmark 10-year yield rose around 3bps points to 2.966% and remained supportive of the strong bid tone surrounding the major.
This coupled with a positive opening across European bourses further weighed on the Japanese Yen’s safe-haven appeal and provided an additional boost to the pair’s ongoing up-move of over 70-pips from an intraday low near the 109.30 region.
It would now be interesting to see if the bullish momentum is strong enough or once again fizzles out near the very important 200-day SMA hurdle as focus shifts to this week’s key event risk on Wednesday – the latest FOMCmonetary policy decision and updated economic projections.
Valeria Bednarik, FXStreet’s own American Chief Analyst writes: “The pair has room to extend its advance now up to the 110.10/20 region. Seems unlikely the pair could break above this region in a risk-averse environment, but if it does, there’s room for an extension up to 111.20/60 during the upcoming sessions. An immediate support comes at 109.50, followed by the low set last Friday at 109.19.”