Fears receded during the past week as traders ditched the Japanese Yen as equities bounced while US government debt yields recovered modestly, after US President Trump spoke about progress in US-China trade talks, pouring some cold water on the issue. During the weekend, news suggested that the US Commerce Department might extend for 90 days the temporary general license given to Huawei so that it can continue serving existing customers. If the news is confirmed, the positive mood would likely prevail. That said, market sentiment remains quite fragile, as the fundamentals related to the global economic downturn are still present. Thus, traders need to stay cautious as any negative headline or tweet can shift the whole market sentiment.
The Yen bulls are possibly in a trouble, as there is a risk of a short squeeze to shake out some less committed bears out of the 107 level. The Dollar has been grinding higher against the Yen throughout last week, as the bulls are looking for a 106.80 retest and possibly 107.20. However, to keep this recent bullish momentum alive, price shouldn’t drop below 106, which is also the 50-day moving average, as it could invalidate the recent bullish narrative on this pair.
Support: 106.20 / 105.80
Resistance: 106.80 / 107.20