USD/JPY: Choppy around 109.50 amid another Iran attack, US-China trade optimism

• USD/JPY carries Friday’s struggle between the Bulls and the Bears.
• Iran’s another attempt to harm the US bases in Iraq joins the arrest of the UK’s ambassador to Tehran.
• US diplomats convey US-China trade optimism, signal talks with the EU.

USD/JPY remains choppy while taking rounds to 109.50 amid the early Asian session on Monday. The pair showed less reaction to the US NFP on Friday as optimism surrounding the US-China trade deal and the absence of further tension between the US and Iran played their roles. Investors will have a little to watch on today’s economic calendar and hence trade/political headlines will keep dominating market sentiment.

Read: What you need to know for the open: Positive noises on trade to counter Persian Gulf conflict risks

US-China, US-Iran are the main catalysts…

With the nearness to Beijing’s diplomats’ welcome in Washington, on January 15, comments from the US policymakers gain more importance and fuel market’s risk tone. More recently, White House (WH) Economic Advisor Larry Kudlow and the Treasury Secretary Steve Mnuchin crossed wires while showing optimism surrounding the US-China trade deal. Though their signals to have trade talks with the EU might negatively affect the risk tone, only slightly, considering the level of friendship both the ends share.

Iran conducted another missile attack in Baghdad to harm the US troops lying there. Even so, no news of major causalities has arrived by now. Also irritating the global leaders were news of Iran arresting the UK ambassador to Tehran.

Markets are likely to have a tough task weighing on the trade and political news and hence USD/JPY could have a bit more of choppier sessions ahead. However, upbeat equities and recovery in the global bond yields seem to keep the market’s risk-tone mostly positive.

That said, Monday’s bank holiday in Japan could also contribute to the lack of activity. Even so, any major trade/political news will not hesitate in propelling markets.

Technical Analysis

FXStreet’s Ross J Burland cites the pair’s nearness to the monthly resistance as signaling the Bear’s commitments while highlighting the importance of 109.70/80 area:

USD/JPY is testing a monthly resistance line established in October 2018 and confluence of a 200-week moving average. USD/JPY closed above the 50-month moving average, tested and pierced 21-month EMA. Failures at this juncture open risk of a 50% mean reversion to a 21-week moving average at 108.60/65. 4-HR 500/200 moving average cross over in the making, albeit price stalling and RSI below OB territory, 109 to hold initial pullback.