USD/JPY moves away from 1-week highs, drops to 108.30

• US Dollar continues to slide slowly against the yen, still above Friday’s close. 
• Some positive tone around markets amid expectations that Trump will meet Xi. 

The USD/JPY pair dropped further during the American session as equity prices trimmed gains in Wall Street. It dropped to 108.30, reaching the lowest since Friday but still above the level it closed that day. 

As of writing trades at 108.40, moving with a bearish bias intraday, and still holding near the multi-month low it reached last week at 107.80 when it dropped boosted by risk aversion and the decline in US bond yields.  “A further correction in risky assets may exacerbate the move lower in USD/JPY near term. Besides, the BoJ has remained fairly resilient in 2019 on their forward policy guidance despite the G10 central bank dovish pivot since January. A lack of additional BoJ easing is also a JPY positive”, wrote Citibank analysts. 

On Tuesday, markets will return to full normality after some holidays on Monday. In the US, PPI data is due and on Wednesday the CPI. Also on Wednesday, inflation data from Japan will be released. 

The current consolation phase in USD/JPY extended on Monday favored by some comments about the meeting with Trump and XI and also after the agreement between the US and Mexico. Trade wars are likely to continue to be a key driver in risk aversion together with growth concerns. From a technical perspective, a daily close below 108.00 will likely lead to further losses, while on the upside, critical resistance levels might lie at 108.70 and 109.10/20. 

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