The USDJPY pair managed to stage a solid rebound on Tuesday, but failed to make a clear break above the critical 200-DMA and got back below the 110.00 threshold today. The immediate support now comes around 109.50.
The dollar still lacks the upside impetus against the yen as the Japanese currency attracts buying interest as a safe haven currency. The trade-war worries still persist in the global markets, which adds to the bearish pressure on the pair. As long as US-China tension continue to escalate, the upside risks for the yen will remain high and the pair will stay vulnerable to further losses even as the USD index looks relatively strong.
From the technical point of view, chances for a more sustainable recovery in the short term are rather low as the price faces a strong hurdle in the 110.20 area, where the 14- and 200-DMAs converge. The pair will likely continue to consolidate around 110.00 with a bearish bias in the foreseeable future. The immediate pressure will ease once USDJPY rises above the 110.80 figure.
By Helen Rush
Senior Analyst at Capital Markets