The sudden drop in US equity futures and European stocks put some downward pressure on the USD/JPY pair, which ultimately broke the consolidation phase of the Asian session.
Nevertheless, the Japanese Yen is still supported by concerns about a further escalation of the trade war, with improved sentiment on comments on Tuesday from US President Trump that trade negotiations with China did not stop, while they show limited positive influence. The US president of the tweeted:
“When the time is right we will make a deal with China. My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn’t make any sense.”
USD/JPY technical analysis
The US Dollar declined towards the 109.00 support area and recently recovered against the Japanese Yen. The USD/JPY pair traded above the 109.20 and 109.40 resistance levels.
The pair even broke the 109.50 resistance and the 50 hourly simple moving average. However, the bulls struggled to clear the 109.80 resistance and the pair is currently forming a major breakout pattern on the hourly chart.
On the upside, a break above the 109.75 and 109.80 resistance levels might open the doors for more gains. The next key resistances are near 110.00 and 110.15.
On the other hand, if there is a downside break below the 109.54 support and the 50 hourly SMA, then the pair could trade below the 109.40 level and the 50% Fib retracement level of the upward move from the 109.01 low to 109.77 high. The next key supports are near 109.20 and 109.08.