USD/JPY: chop, chop, confined to familiar range bouncing off trend line support

• USD/JPY: supported by the decending trendline support.
• USD/JPY bulls committed at 105, at least until FOMC.

Bouncing off trendline support time and time again, albeit, with lower lows on the daily sticks, USD/JPY has been choppy as we head towards the close for Thursday, with risk-off flows benefiting the safe-haven side of USD/JPY in the carry trade unwind. Currently, USD/JPY is trading at 106.22, down -0.09% on the day, having posted a daily high at 106.37 and low at 105.79.

USD/JPY started the European session having fallen from 106.36 to 105.83 in Asia on Japanese exporter sales with bulls concerned for the 105 handle, although huge bids are sighted ahead of 105 barriers while markets await the FOMC this month. 

In the US session so far, the US dollar was better bid on the back of a series of more upbeat data than what has been seen in recent days. Both Import Prices and Jobless Claims were positive while the Empire Manufacturing data was also better than expected. Also, Kudlow's appointment as head of National Economic Council was seen as moderating influence on Trump's trade stance, although news that Mueller has subpoenaed the Trump Organization made for a bout of risk-off in NY.

Risk-off is elevated: Mueller has subpoenaed the Trump Organization

Yen crosses rolled over and the yen went as high as 105.93 from 106.29 before bouncing back onto the 106 handle as stocks stabilise and US 10yr yields harden in at 2.8170% having traded within a range of between 2.7952 - 2.8335% on the day so far. 

Political focus

"Domestic political developments are in focus as market participants consider Prime Minister Abe’s growing scandal and the risks to his Abenomics policy agenda—specifically the BoJ’s exceptionally accommodative policy stance. Finance Minister Aso is also implicated and his decision to skip next week’s G20 finance ministers’ meeting in Argentina has added to participants’ concerns," analysts at Scotiabank explained.

USD/JPY levels

These feeble upside recovery attempts are waning and the pair is making a lower low on a daily basis, tracking the daily descending trend line support. Bulls need to get through JPY107.20 and break this upper end of the range near JPY108.  On the wide, 110.85 is key ahead of and 111.44/50 as being a double Fibonacci retracement that is lining up with a lower and descending 200-D SMA at 111.03. The downside, 105.80 guards a run to 104.80 that opens up territory with little chart support towards 100.70/99.00 on the charts.