USD/JPY: Risk-off markets see yen stronger, bears target below 110 handle

• USD/JPY is unchanged on Japanese CPI as traders focus on external and potential surprise factors such as Brexit. 
• March Tokyo area headline CPI: 0.9% (vs. expected 0.9%).
• USD/JPY is currently trading at 110.59 within a range of 110.53/71 as Tokyo comes on line and weighs up risk events ahead.

USD/JPY has been testing to the downside with the price dipping just below the 110.00 figure overnight on risk aversion picked up in the London morning but recovered to 110.65 as US equities rose:

• The Dow Jones Industrial Average added 91.87 points, or 0.4%, to close at 25,717.46.
• The S&P 500 index put on 10.07 points, or 0.4%, to end at 2,815.44. 
• The Nasdaq Composite Index finished with a gain of 25.79 points, or 0.3%, at 7,669.17.

On the data front, U.S. gross domestic product growth in the fourth quarter which was lowered to 2.2% from an estimated 2.6% annualized rate, sparked by softer consumer spending and subdued business investment, sending U.S. GDP growth for 2018 to 2.9%.

Elsewhere, there was Fedspeak from Williams, George, Clarida and more recently, in early Asia, Bullard. Williams said he’s not as worried about a recession as some in the private sector. Clarida, argued that risks are one reason the Fed can afford to be patient. George, who supported the Fed’s pause, noting benign inflation plus downside risks to the economy and Bullard said that the normalisation process in US is at an end. As for yields, the US 10yr treasury yield bounced off yesterday’s 16-month low of 2.34% to 2.39%, the 2yr from 2.18% to 2.23%. Fed funds futures prices continued to imply a 100% chance of a Fed rate cut by December.

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet, explained that the pair is little changed for a second consecutive day, quite normal in risk-averse environments as both currencies are perceived as safe-havens. From a technical point of view, and for the short-term, a neutral-to-bearish stance persists, as, in the 4 hours chart, the pair is holding above a mild bullish 20 SMA but continues developing well below the larger ones and with the 100 SMA gaining bearish traction. Furthermore, technical indicators in the mentioned chart had lost upward strength within positive levels, now nearing their midlines. The key to the upside is the 111.00/10 price zone, as only above it bulls will be confident enough to add to their longs.