15 Mar 2019
• North-Korean news prompted some safe-haven buying and weighed on the major.
• Downside remains limited after BoJ’s decision to leave rates/JGB target unchanged.
• Remerging US-China trade tensions/weaker USD might cap any meaningful gains.
After a sharp intraday pull-back from over one-week tops and a subsequent bounce, the USD/JPY pair now seems to have stabilized around the 111.70 region.
The pair initially built on the overnight goodish up-move and climbed to an intraday high level of 111.90 following the latest BoJ monetary policy update. As was widely expected, the central bank decided to maintain short-term interest rate target at -0.1% and voted 7-2 to keep the 10-year JGB yield target around 0%.
The uptick, however, lacked any strong follow-through, rather met with some support and the pair dropped back to retest the very important 200-day SMA in reaction to news that North Korea's Kim Jong Un might rethink suspension of missile launches that was initiated last year.
On the trade-related front, reports that China is considering to delay the Trump-Xi meeting to at least April extended some support to the Japanese Yen's safe-haven status, though was largely offset by a positive tone around equity markets and did little to exert any additional downward pressure.
Meanwhile, the US Dollar failed to preserve/capitalize on the overnight uptick and held on the defensive amid some renewed weakness in the US Treasury bond yields, which might further collaborate towards keeping a lid on any meaningful up-move for the major, at least for the time being.
Moving ahead, today's US economic docket, featuring the releases of Empire state manufacturing index, industrial production and capacity utilization data, followed by Prelim UoM Consumer Sentiment and JOLTS Job Openings will now be looked upon for some meaningful trading opportunities on the last day of the week.
Omkar Godbole, FXStreet's own Analyst and Editor explains, “the bearish divergence of the relative strength index (RSI) on the hourly chart indicates scope for a pullback to key support levels at 111.49 (200-hour MA) and possibly to 111.33 (200-day MA). The bullish case would again strengthen if the spot finds acceptance above 111.90.”
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