USD/JPY bears in control in technically bearish short-term set-up

• USD/JPY bears taking on the 50-HMA to the downside in a soured risk environment.
• Trade talks/deals, FOMC and US GDP all in focus.

USD/JPY is attempting to base in the 108.80s although the bulls lack conviction in a technically bearish set-up as markets begin to discount the optimum of a Sino/US trade deal following a few negative headlines on the matter. 

Overnight, USD/JPY slid from 109.00 to 108.85 while traders get set for the Federal Open Market Committee tonight in the US session which follows the advance Q3 Gross Domestic Product reading a few hours earlier – Indeed, it should be a fun-packed day for US Dollar pairs. 

All eyes on the FOMC

The US 2-year Treasury yields were capped at 1.66% (for a one-month high) and consolidated mostly around 1.64% while the 10-year yield also stuck to a tight range between 1.82% and 1.85%. As for expectations in the market with respect to the Federal Reserve, markets are pricing in around 22 basis points of easing at today’s FOMC meeting and a terminal rate of 1.29% (vs 1.88% currently), according to analysts at Westpac who also noted President Trump tweeting that, “The Fed doesn’t have a clue! We have unlimited potential, only held back by the Federal Reserve.”

Global markets are a little soured on negative US/Sino trade deal noise

Meanwhile, shares and global markets are a little soured on a number of headlines which are weighing on sentiment with respect to Sino/US trade deal progress. Overnight,  Reuters quoted a US official as saying that the US-China Phase 1 trade deal may not be ready to be signed by the APEC meeting (15th-17th Nov). This comes in stark contrast to President Trump's recent optimism who said that they are aha o schedule in putting a deal together. 

However, the same US official said, “that doesn’t mean that it falls apart. It just means that it’s not ready.” The White House later stated that the aim remained to sign the deal in Chile. In more recent trade, in early Asia, news that China had warned that the U.S. criticism at the U.N. over Xinjiang was not 'helpful' for trade talks which have weighed somewhat on USD/JPY in Tokyo, -0.06% at the time of writing. 

USD/JPY levels

The pair has been capped by the 200-day moving average and bears are attacking the 50-hour moving average in the 108.80s. The focus should now be with the 108.50s and mid -Sep double tops. On the upside, a break of the 200-DMA opens risk for an extension beyond a 61.8% retracement of the late April to late August range in the 109.40s.