What’s next? – USDJPY 31.05.18

The dollar was trading 0.08 percent higher vs the yen at 109.00 as of 10:00 GMT on Thursday, amid easing political worries and as traders eyed inflation figures in the United States.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was down 0.40 percent at 93.74 by the time of this writing.

Market participants seemed to have priced in the possibility of snap elections in autumn, despite the recently nominated Prime Minister Carlo Cottarelli has repeatedly insisted on “new possibilities” to form a government.

On the other side, China said it was ready for any trade war in response to the decision made by the Trump administration to move forward with a list of $50 billion worth of tariffs on Chinese goods as soon as next month.

On the data front, China’s manufacturing Purchasing Managers’ Index (PMI) for May came in at 51.9 points, above an estimated reading of 51.4 points. The non-manufacturing PMI for May also outperformed expectations at 54.9 points.

The USDJPY is widely dominated by risk sentiment. The USD is seen as the risky side, while the Japanese yen plays as the safe-haven component. At the moment, and despite some recent panic scenes, the fundamental picture remains bullish and risk demand continues to be solid. For such reason, we expect an upward extension of this pair in the medium term.

From a technical view, key indicators predict further loses in the short run. First support is found at 108.57 and first resistance at 108.75. The current pivot point for the pair is placed at 108.69.

Ahead in the session, traders will directing their attention to the US core PCE Price Index for April and initial jobless claims at 12:30 GMT, which come along with personal spending for April. Pending home sales for April are scheduled at 14:00 GMT. The Energy Information Administration will release its weekly crude and refined product stockpile as of 15:00 GMT.

FortFS