USD/JPY eyes a break below 109.00, despite notable USD demand

The bid tone around the US dollar keeps growing bigger as we head towards the European opening bells, having little impact on the USD/JPY pair, as the bears remain poised to test 109 handle amid persisting risk-off market profile.

USD/JPY: Risk-off weighs

Renewed geopolitical tensions between the US and North Korea returned to markets, after North Korea warned the US over its military exercises with South Korea, keeping the safe-haven bids for the Yen underpinned, eventually dragging USD/JPY lower towards 109 handle.

Also, tumbling Japanese stocks amid reduced demand for risky assets also exerted bearish pressure on the major. Japan’s benchmark index, the Nikkei 225 dropped to fresh three and a half month lows of 19,368 points, down -0.40% on the day.

The spot failed to benefit from resurgent broad based US dollar demand amid higher Treasury yields, after the resignation of Trump’s controversial adviser Bannon provided the much-needed optimism on the Trump administration.

Later today, the pair will closely track the broader market sentiment and price-action around Treasury yields for further momentum, as the US docket remains data-dry with no Fedspeaks on the cards as well.

USD/JPY Technical levels                 

To the topside, a daily close above 5 & 10-DMA located near 109.50 would shift risk in favor of a re-test of 110 (20-DMA/ round number) beyond which 110.37 (Aug 17 high) would be back on sight. A break below 109 (zero figure) would open doors for 108.58 (multi-month low). A break lower would yield a test of 108.11 (April lows).