USD/JPY weaker, sidelined around 105.60 ahead of ADP

• Spot is sharply lower in the 105.60 area on the back of rising risk aversion.
• US 10-year yields bounce off lows in the 2.84% region.
• US ADP report, Trade Balance figures and the Fed’s Beige Book coming up next .

The greenback remains on the defensive vs. its Japanese counterpart on Wednesday, pushing USD/JPY to the 105.60 region and closer to YTD lows around 105.20 (March 2).

USD/JPY boosted by risk-off, looks to ADP

The Japanese safe haven gathered extra traction today after the risk-off sentiment returned to the markets in response to the recent resignation of the White House economic adviser (and pro-trade) Gary Cohn.

Investors have considered Cohn as the last line of defence prior to the implementation of tariffs on US imports of steel and aluminium, recently announced by President Trump. Cohn’s departure has not only opened the door to a probable global trade war but it has also exposed the reigning chaos in the Trump administration.

The up move in JPY has been in tandem with the drop in yields of the US 10-year note, reflecting the demand for safer assets. In fact, yields dropped to the 2.84% neighbourhood prior to the current rebound to the vicinity of 2.87%.

Moving forward, USD should be in centre stage in light of the publication of the ADP report, Trade Balance figures for the month of January and the release of the Fed’s Beige Book as well as the speech by Atlanta Fed Raphael Bostic (voter, centrist) on economic outlook. In japan, Q4 GDP figures are expected tomorrow ahead of the BoJ meeting due on Friday.

USD/JPY levels to consider

As of writing the pair is losing 0.55% at 105.55 and a breakdown of 105.25 (2018 low Mar.2) would aim for 102.54 (low Nov.3 2016) and then 101.15 (low Nov.9 2016). On the other side, the immediate up barrier aligns at 106.44 (10-day sma) seconded by 107.09 (21-day sma) and finally 107.92 (high Feb.21).