Traders dropped the Dollar and fled to the anti-risk Yen yesterday after dovish testimony by the US Federal Reserve Chairman Jerome Powell. Apart from the weakness in the US Dollar and yields, the pair is likely feeling the heat of US-China trade tensions. With Chinese President Xi refusing to make strong commitments on purchasing American farm products, putting a big question mark over the new rounds of US-China trade talks. Also, the pair may suffer a deeper drop during the day ahead if US equities turn negative on trade concerns.
The Dollar/Yen dropped over 100 pips after touching the multi-year resistance trend line, 109. The bears were to break below the 50 and the 200-day moving averages, which is a major bearish signal. The bulls found a temporary support at 107.87, but the momentum is still very bearish. A small bounce towards 108.15 is expected before the sellers regain control and attempt to break below today’s low to target 107.6.
Support: 107.87 / 107.6
Resistance: 108.15 / 108.5