Yen Demand Reemerges Amid Trade Developments

Risk sentiment looks subdued on Monday, with investors prefer a cautious approach due to the lingering uncertainty around the upcoming US-China trade talks and ahead of fresh economic data, including the key NFP employment report.

Against this backdrop, USD/JPY turned lower after three days of gains. The pair struggled to make a clear break above the 108.00 handle and shifted to the 100-DMA around 107.80. Traders continue to closely monitor developments on the trade front, with risk sentiment has deteriorated amid last Friday’s reports that the Trump administration was considering curbs in investments into China including delisting Chinese companies from US stock exchanges. Such a step would be a significant escalation in the trade tensions between the two countries.

As such, the yen demand may persist in the near term. Moreover, the selling pressure in the risky assets segment could increase should fresh economic data disappoint and confirm the threat of a recession. Technically, the pair may retreat to the 107.40 support, from where it could bounce higher should risk demand reemerge. Otherwise, USD/JPY could get back to the 107.00 area in the medium term.

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