USD/JPY: risk off on N.Korea opens up 108 handle breakout zone

Currently, USD/JPY is trading at 109.58, down -0.06% on the day, having posted a daily high at 110.26 and low at 109.51.

Market wrap: US dollar higher despite NFP disappointments - Westpac

USD/JPY dropped on risk aversion on the back of N.Korea firing another missile over Japan and testing a nuclear bomb may just have crossed the line as far as Beijing is concerned. 

As a result of the tests, there were two North Korean earthquakes, measured by Chinese monitors as magnitude 6.3, and then magnitude 4.6, triggered by the hydrogen bomb explosion on Sunday. This also prompted reports of tremors in Chinese border towns and scrambled Chinese jets with fear of radiation leaks in the area. This is the second time this year that North Korea has disrupted Beijing's attempt to highlight its place on the world stage during Xi's One Belt One Road forum.

Meanwhile, the US dollar was rescued on Friday after the nonfarm payrolls data that disappointed, but when news hit the wires that the ECB will not be tapering at this week's meeting, there was a scramble out of the euro and into the greenback. This was all on the back of a Bloomberg report said that ECB wants extreme prudence on policy and communication. 

USD/JPY levels

The yen is now moving away from the lower end of the breakout range between 108 and 114.00. In sustained risk aversion, the 109 handle guards 16th April lows at 108.12 before 107.50 support. On the upside, the 50 day sma is located at 111.08  just above the August high. "Above here would target the 112.50, the 200-day ma. There is scope for the top of the range at 114.38/49," argued analysts at Commerzbank.