USD/JPY: Minor recovery capped by 110 as risk-off persists on N. Korea

Despite USD/JPY’s several attempt to close in the bearish opening gap, the bears continue to guard the 110 barrier, leaving the rate consolidating the North Korean nuke tests induced drop around 109.80 levels.

USD/JPY: A negative start to the week

The spot remains heavily offered so far this session, as the Yen continues to remain underpinned amid widespread risk-aversion, triggered by the weekend’s hydrogen bomb test conducted by North Korea, making it the sixth nuclear test and prompting a round of global condemnation.

Hence, investors flocked to safety on the first trading of this week, propping up the demand for the safe-havens such as the Yen, gold, Swiss France etc., at the expense of risk assets viz. Asian equities, oil and Treasury yields.

More so, the sentiment around the US dollar remains sour, following the release of disappointing US labour market report last Friday, which poured cold water on a Dec Fed rate hike, while collaborating to the weakness in USD/JPY. The USD index drops -0.20% to 92.63, having reversed a downward spike to 92.06.

Looking ahead, with the US and Canadian markets closed in observance of Labour Day this Monday, low volumes and minimal volatility will persist. Meanwhile, the spot will continue to take cues from the risk trends and USD price-action in the session ahead.

USD/JPY Technical levels                 

To the topside, a daily close above 110.01 (5-DMA) would shift risk in favor of a re-test of 110.72 (50-DMA) beyond which 111 (round number) would be back on sight. A break below 109.53 (daily low) would open doors for 109.38 (classic S2/ Fib S3). A break lower would yield a test of 109 (zero figure).