USD/JPY takes a sharp U-turn on N. Korea risks, attacks 112.00

The USD/JPY pair stalled its 2-day recovery mode and turned back into the red zone amid renewed risk-off trades, sparked by fresh North Korea threat.

USD/JPY rejected at 10-DMA of 112.31

The safe-haven Yen is back in demand across the board, after the Gaurdian reported the North Korean UK envoy, as warning that the situation in the Korean Peninsular has reached "the touch-and-go point and a nuclear war may breakout at any moment".

The North Korean headlines triggered a renewed bout of risk-aversion across the board, boosting the demand for the safe-havens at the expense of the higher-yield/risk assets such as the US rates, Asian equities and oil prices.

Moreover, latest headlines citing that the US and Japanese trade talks failed during the economic talks on Monday, also added to the jitters surrounding the economic relationship between the two nations.

Meanwhile, the bulls appear to guard the 112 barrier, as the US dollar index defends bids above 93 handle, up 0.10% on the day. On Monday, the greenback derived support from higher Treasury yields on reports that John Taylor could be the next Fed Governor.

Focus now shifts towards the US dataflow and Fedspeaks for fresh impetus on the buck, while markets will pay close to attention to any N. Korea headlines for further momentum

USD/JPY Technical View

Jim Langlands at FX Charts lays out the preferred strategy: “The dollar traded down to Friday’s lows, today reaching 111.64, before bouncing strongly on news that the supposedly hawkish John Taylor had a positive interview with Donald trump regarding the upcoming Fed Chair vacancy. Currently near session highs of 112.28, the short term momentum indicators now appear set to allow further dollar gains, where 112.75 would be the first real hurdle ahead of 113.00, and 113.43 (6 Oct high). Good support now seen at 111.60/70, and buying dips is preferred today. Further out, the dailies look less positive, so further range trade between 112.00/113.00 may be in store. Buy US$Jpy @ 111.85. SL @ 111.45, TP @ 112.75.”