Modest USDJPY gains could get tested overnight
Through the quiet Monday session, we saw USD/JPY gravitating higher amid limited news flow and little on the US data front. From the mid 106.00's - where we noted strong support last week, the spot rate has managed to climb tentatively back above 107.00 again, yet progress through the figure looks cautious at best and for good reason. With the US trade talks to resume later this week and both sides seemingly digging in, the prospects for a breakthrough remain slim, so it buyers may be taking this near term window of opportunity to test offers ahead of this.
Closer in on the horizon however, we have some notable Chinese data to consider with trade data top of the list and key to the fortunes of global growth. Alongside this, we also have the Caixin services PMIs which may also alert the market to some economic weakness, though naturally, the focus here is on manufacturing more than anything else.
Even so, there are plenty of reasons to be wary of the latest gains, which may only be a technical move based on the demand seen at the lows. Should be press a little higher, w expect to see much stronger selling into 107.50, and any move higher is likely to draw in continued selling, which skews the risk-reward to the downside given the event risks ahead.