USD/JPY: risks to drop below 113.50 are significant with continued Trump uncertainties

Currently, USD/JPY is trading at 114.12, down -0.40% on the day, having posted a daily high at 114.51 and low at 113.62.

USD/JPY is losing ground at the start of the week, albeit more stablised in the US session, rising from aforementioned lows to current spot. The Yen has picked up some of the safe-haven flows and continues to outperform across the board now with US yield premium diminished by market's quick turn of appetite in respect to the Trump reflation trade and Fed's hawkishness in December.   

"The overall dollar long is big enough to leave me thinking that ‘long dollars' remained a consensus view into the back end of last week ...  As for the 10-year Note short, there may be different positions in cash and in other parts of the curve, but it still remains a sizeable barrier to a return of the bear market in bonds that is probably a necessary condition for the next leg up in the dollar rally," explained Kit Juckes, economist at Societe Generale. 

"Donald J Trump will become the 45th President of the United States on January 20 - there is great uncertainty surrounding the policies his administration will pursue, and its priorities," noted analysts at Brown Brothers Harriman, and in such an environment, the Yen could benefit and break below 113.50 would be a significant event on a daily closing basis.

USD/JPY levels

With spot trading at 114.12, we can see next resistance ahead at 114.17 (Yesterday's Low), 114.18 (Daily Open), 114.23 (Hourly 20 EMA), 114.51 (Daily High) and 114.57 (Monthly Low). Support below can be found at 114.01 (Daily Classic S1), 113.62 (Daily Low), 113.44 (Daily Classic S2), 113.04 (Weekly Classic S1) and 112.72 (Daily Classic S3).