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USD/JPY remains confined in tight range below 110

  • US Treasury Secretary says phase-two deal will have tariff rollbacks.
  • 10-year US Treasury bond yield erases 1% on Wednesday.
  • US Dollar Index stays in negative territory ahead of PPI data.

The USD/JPY pair failed to hold above the 110 handle after renewing its highest level since mid-May at 110.21 on Tuesday and seems to have gone into a consolidation phase on Wednesday as markets are waiting for the details of the US-China phase-one trade deal to be released. As of writing, the pair was down 0.08% on the day at 109.89. 

In an interview with CNBC on Tuesday, US Treasury Secretary Mnuchin said that they will have additional tariff rollbacks in phase-two of the deal to help the market sentiment improve in the early trading hours of the American session. 

Uninspiring USD performance limits pair’s gains

However, the broad-based USD weakness made it difficult for the pair to gain traction. The US Dollar Index, which slumped to a weekly low of 97.23 earlier in the day, was last down 0.06% on the day at 97.33. The NY Fed’s Empire State Manufacturing Survey and the Producer Price Index (PPI) data from the US will be featured in Wednesday’s economic calendar.

More importantly, investors will be paying close attention to the details of the phase-one trade deal and assess its potential impact on the global economy. If risk appetite returns in the second half of the day, we could see the pair test the critical 110 mark one more time.

Finally, Machine Orders and PPI data from Japan will be published on Thursday. 

Technical levels to watch for

 

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