After two weeks of declines, USDJPY makes bullish attempts at the start of a new trading week. The pair is now back around the 200-DMA which continues to serve as the immediate resistance zone, coming around 109.00.
Dollar demand picked up amid the renewed trade optimism after China said it will raise penalties on violations of intellectual property rights. As this issue is one of the sticking points in trade talks with the US, investors took this decision as a step towards a potential trade truce between the two countries. It remains to be seen how Trump will react to this step from Beijing, and positive signals from Washington could further boost risk sentiment in the short term.
In this scenario, USDJPY may extend gains but to show a decisive break above the mentioned moving average, the pair needs to receive a clear positive message from the United States. Otherwise, the trade uncertainty could cap investor bullishness and bring back the safe-haven demand for the Japanese yen.
Also, market focus will son shift to Fed’s Powell testimony. Should the Federal Reserve governor express a dovish tone, the greenback will come under pressure across the board, which will cap the upside bias in the pair.