Rebound in risk sentiment sees the yen being the weakest performer today

Turnaround Thursday? Is that a thing now? Well, in the aftermath of yesterday's escalation in the trade rhetoric markets today seem to be relatively calmer. I mentioned it a little yesterday that the Chinese response may not come so soon, so the 'lie in wait' action by market participants may soon be met with the fact that markets these days are "quick to forget".

And we're seeing hints of that already today. Much like we did last Friday after the US tariffs were put into effect.

Anyway, on to USD/JPY. The pair has been moving higher again today and buyers are keeping it above the 112.00 handle. The pair touched a high of 112.38 but resistance @ 112.33 (76.4 retracement level) is so far holding the pair back.

Technically, the pair looks set for a continued push higher. But there are levels that it needs to navigate in order to do so. The 76.4 retracement level @ 112.33 is one of them, followed by resistance near 113.40-75 (dotted lines) but that's about 100 pips away still.

When looking at USD/JPY, this is one of the better technical snapshots that can be drawn in my view:

It's still the daily chart, but this is looking at the bigger picture (longer period). In essence, a daily hold above 112.00 is also crucial. That coincides with the 38.2 retracement level seen here.

Moving above that is the pivotal resistance area at 114.54. That has been a stubborn level that buyers have been unable to break above in the last three attempts stretching back to May last year. We're still some way to go before that, but a hold above 112.00 will set a good platform for buyers in the coming sessions.

As I also mentioned above, the trade rhetoric may take a backseat for a while now with the US set to finalise the list of additional $200 bn tariffs - which is only to be in effect after two months. And with earnings season approaching (positive outlook on that as well) stocks may just see further gains and that is something that will continue to keep risk sentiment healthy (negative for the yen).

The only caveat remains the dollar part of the equation. Dollar bulls still hold the momentum in that regard, but resistance between 95.15 and 95.53 still needs to be broken in order for the dollar to sustain a move higher from here. For now, the momentum in USD/JPY upside is still there but watch out for key levels above and the dollar index down the road.