USD/JPY trades just near 108.20 as sellers remain in near-term control
The key headline in Asia Pacific trading was that the US and Mexico failed to reach a compromise on trade, which resulted in yen strength amid more cautious tones in equities and bonds. USD/JPY fell from 108.40 levels and is now trading under the 100-hour MA (red line) as sellers re-establish near-term control in the pair.
Looking ahead, the 100-hour MA @ 108.27 will be a key point of contention between buyers and sellers to define the near-term bias.
But ultimately, for buyers, I reckon a move back above resistance and offers around 108.40-50 is much needed to extend price towards testing the 200-hour MA (blue line) @ 108.88 currently. Further offers are then seen around 109.00 so those levels above will be key resistance areas to look out for today.
Not forgetting, there's also large expiries at 108.50 and 109.00 to add to the layer of resistance/offers highlighted.
Meanwhile, for sellers it is all about keeping price below the 100-hour MA and chase a clean break below the 108.00 handle. But that would require a further deterioration in risk sentiment so a lot will hinge on how trade talks develop over the coming day.
As such, large expiries around 108.00 and 108.25 may very well help to anchor price action before US trading later should risk tones continue to flip flop around during the day.
In my view, equities remain the most complacent among all asset classes right now, so if Mexico tariffs do kick in on Monday, I would expect a drop there to fuel further yen strength over the coming days. In any case, I still view the risk for sellers to be above the 108.50 level with further risk levels around 108.90-00.