USD/JPY Could Reverse Gains

USD/JPY is gaining bullish momentum since the start of the week. The pair climbed back above the 107.00 handle and clings to the levels just below the 107.50 intermediate resistance. Once above, the dollar will encounter the 100-DMA which now comes at 107.63.

The upside impetus however looks unsustainable as risk aversion could reemerge at any point. On Tuesday, global stocks show a bullish bias as US-China trade hopes endure. China is reportedly reluctant to agree a broad trade deal, so many investors doubt that the two countries will be able to strike a solid agreement. So, should the upcoming negotiations disappoint, safe-haven yen demand could resurface.

By the way, the US Commerce Department on Monday put 28 Chinese companies on its trade blacklist over Beijing’s treatment of Uighur Muslims. Against this backdrop, the likelihood of resolution of the trade dispute is decreasing. In a negative scenario, the pair may suffer heave losses and get back to the lows around 106.50, with the target comes around 106.20.

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