USD/JPY retesting day lows, dominance of 109.00 key

USD/JPY has caught another offer tone ahead of the Frankfurt open, last exchanging hands at 108.69, nearing its day low of 108.62 printed mid Asia session.

USD/JPY back below 109.00, Nikkei sold-off

The break below 109.00, reportedly on long liquidation/profit-taking, has resulted on an abrupt temporary end of what has been a significant upside run topping out at 109.35, which saw the 50% retrac of the USD/JPY bear run post BOJ policy outcome briefly surpassed before the rejection in Asia. The downward pressure in the Nikkei 225, closing near flat levels after erasing all its opening gains, has contributed to the Yen strength.

In the economic calendar today, there are no events that may impact the pair, which will continue to be driven by risk on, risk off flows, recently supportive for a potential bullish continuation. Traders, should monitor the behaviour on the VIX, US 30 Treasuries and the yeild spread between US and Japan for further clues in directional bias.

USD/JPY key levels

On the downside, should the selling pressure persist, below Asian lows the 108.50 mid round number will be exposed, ahead of 108.35/40 (POC Tuesday US session), followed by an acceleration towards 108.00 round number. On the upside, 109.00 has now become a key level that sellers need to protect in order to maintain the short term bearish momentum. Should buyers regain the level and acceptance is seen above, the trend highs come as next resistance, ahead of further gains towards potentially 110.00.