China president Xi Jinping's calm gave risk assets a boost
And US equity futures jumped, alongside regional equities in Asia as well. That has seen yen pairs climb as the yen itself retreats ahead of the European session.
The trade for USD/JPY will still be that of stocks/risk sentiment. Yesterday's trading movement was a prime example of that once again. As US stocks headed into the close on the lower side, so did USD/JPY.
Now, Xi Jinping's speech did little to change the trade war rhetoric in my view. But the market is taking it in stride and his conciliatory stance means that it is now up to Trump to decide on where this trade spat is going to go from here.
So, that's the key risk factor for market sentiment and for equities - which in turn is going to impact yen pairs.
The next key data to look out for will be tomorrow's US CPI report. But until then, expect the pair to trade range-bound pivoting around 107.00 - unless there is a massive follow through buying on risk sentiment (watch out for US stocks later) or a reversal from a Trump tweet.
There is a large option expiry at the figure level reported around $1.1 bn for tomorrow's expiry. So, that will also play a role in keeping price action contained around 107.00 until we have another catalyst.
