USD/JPY: Risk aversion returns to market, 110.40/30 regains market attention

• Brexit news couldn’t please bulls for long as North Korea, China triggered risk off.
• The US data and the UK PM’s ability to progress over Brexit remains in highlight.

USD/JPY failed to extend yesterday’s pullback beyond 111.00 as the quote dropped to the lows near 110.60 around early Asian session on Friday. Return of Japanese traders after a holiday met renewed risk aversion wave. Investors may now focus on risk events like Brexit and political pessimism surrounding the US, North Korea and China, coupled with the US data, in order to determine near-term trade moves.

Early Friday, news that the EU agreed to postpone the Brexit deadline off from 29 March and triggered some risk-on moves; though, news that North Korea has asked the US to remove its weapons from Hawaii and Guam led the balance. 

Following that, news that China announced anti-dumping duties over certain products from the EU, Japan, South Korea and Indonesia further leveled out the risk-off and pleased USD/JPY sellers.

It should also be noted that JPY traders gave little importance to Japan’s national core consumer price index (CPI) measures published earlier as Finance Minister Taro Aso said the economy is on a moderate recovery mode.

Other than EU and US leaders’ response to the North Korean and Chin’s recent actions, Brexit worries could continue directing immediate risk sentiment as the UK PM Theresa May is still to get British parliament approval for her third proposal in order to avail deadline extension till May 22.

On the data side, the US Markit PMIs and existing home sales figures should be observed closely for predicting immediate moves. While expected weakness in the composite PMI may favor USD/JPY sellers, likely improvement in housing market stat could challenge the present mood.

USD/JPY Technical Analysis

50-day simple moving average (SMA) and an upward sloping trendline stretched since January 04 highlights the importance of 110.40/30 area for USD/JPY traders. A break of which can trigger the pair’s drop to 110.00 and 109.80.

Alternatively, 100-day SMA level of 111.30 and 200-day SMA level near 111.50 can confine the pair’s immediate upside, clearing which 112.00 can lure bulls.