USD/JPY erases majority of daily gains on political turmoil in US

USD/JPY erases majority of daily gains on political turmoil in US

11 July 2017, 18:29
Roman Vashchilin

The USD/JPY pair lost nearly 50 pips in a matter of minutes after Donald Trump Jr. tweeted out an e-mail chain where Russians offered him information on Hillary Clinton that could help the Trump campaign. The pair quickly fell from 114.50, the highest level since March 15, to a fresh session low of 114.02. After the initial drop, the pair retraced o portion of this drop and is now trading at 114.20, still up 0.13% on the day.

The picture posted on Donald Trump Jr.'s, son of US President Donald Trump, official Twitter account shows that he received an e-mail from Rob Goldstone,  a former British journalist who worked for daily newspapers and radio stations in London, in which Goldstone said that he had received a phone call from a Russian businessman who claimed to have met with the Crown prosecutor of Russia who offered to provide the Trump campaign with some official documents and sensitive information that could incriminate Hillary Clinton. 

  • Donald Trump Jr. tweeted out e-mail chain that promised info on Clinton

Major equity indexes in the U.S. also reacted negatively to this development, suggesting that investors quickly moved away from riskier assets. As of writing, the Dow Jones Industrial Average is losing 0.17% while the S&P 500 is down 0.2%.

The market sentiment in the remainder of the session could continue to impact the pair's price action. Fed Chair Janet Yellen's semi-annual testimony on Wednesday and Thursday is expected to be the primary catalyst in the second half of the week.

Technical outlook

Despite that recent retreat witnessed in the pair, bulls are still seemingly exhausted with the daily RSI remaining in the overbought territory above the 70 handle, and the pair could have a difficult time sustaining this uptrend before making an over-due technical correction. 114.50 (daily high) could be seen as the initial hurdle ahead of 115 (psychological level) and 115.50 (Mar. 10 low). On the downside, supports could be seen at 113.85 (Jul 10 low), 113.15 (Jul. 7 low) and 112.75 (Jul. 4 low).

  • USD/JPY now targets 115.50 – UOB
  • USDJPY to end this year at 110 - Scotiabank
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