The Yen posted additional gains yesterday after China raised tariffs on $60 billion of US goods, extending the bilateral trade war. Equities dropped on the fear of a possible global recession. However, the Japanese currency lost its momentum and equities bounced after Trump’s optimistic comments regarding the future trade negotiations. Moreover, BOJ Kuroda reiterated the need to continue easing for a while. His comments, however, was ignored by the markets, as the main sentiment driver is currently the trade war. Traders will closely monitor the index futures today, should equities surrender gains, the Dollar/Yen will likely fall back towards yesterday’s lows.
The Dollar/Yen is trading in a downward channel. Currently price is located just below the 109.70 (R1) and the channel resistance. The bias remains with the bears as long as price remains below this key resistance level. A break above it however, could push the pair higher, possibly towards 110 (R2).
Support: 109 / 108.50
Resistance: 109.70 / 110.00