USD/JPY: Steady in the opening hour of Tokyo, eyes on downside

• Focus is moving back to the Federal Reserve, bt outcome might backfire.
• A break below it would open doors for a steady decline toward the mentioned 104.44.

USD/JPY is steady in the opening hour of Tokyo. The pair currently trading at 105.73 having been stuck in a tight range between 106.65 and 105.79. 

Traders continue to fear a global slowdown and the ramifications of a protracted trade dispute between the US and China. As for data, the Conference Board’s consumer confidence index far outpaced consensus estimates at 135.1 in August from 135.8, a resilient reading in the face of escalating trade tensions and volatile markets.

Indeed, weaker U.S. stocks and a drop in Treasury yields with investor's lack of optimism for progress on U.S.-China trade talks boosted the safe haven's appeal.  The US 2-year treasury yields ranged between 1.51% and 1.55% while the 10-year yield fell from 1.52% to 1.47%. Markets continue to price around 25bp of easing at the 19 September Fed meeting.

Fed meeting to support the Dollar? 

Focus is moving back to the Federal Reserve, but those who expect the dollar to weaken on the back of the Fed cutting interest rates have so far ended up disappointed. "The Bloomberg Dollar Index actually rallied following the reassurance rate cut announced in July to a new year-to-date high in August when trade tensions escalated," analysts at Rabobank noted. 

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet, explained that the USD/JPY pair is technically bearish, supported not only by technical readings but also by the fundamental background:

"Monday’s relief rally gave sellers to chance at higher levels, and lower lows below the yearly one set this week at 104.44 are still on the table. Technically, the 4 hours chart shows that the pair was capped by bearish 20 and 100 SMA, both converging in the 106.00/10 price zone, while technical indicators hold directionless, but within negative levels. Nevertheless, the decline is set to continue, with the immediate support at 105.58, this Tuesday’s low. A break below it would open doors for a steady decline toward the mentioned 104.44."