USD/JPY: breaking down the trend line support, 105 handle here we come?

• USD/JPY continues to fall and now pressures 106.20 for fresh lows.
• USD/JPY bulls committed at 105, at least until FOMC?

Trendline support is under pressure yet again as the risk off theme continues in the Tokyo opening hour with risk-off flows and an unwinding of the carry trade. Currently, USD/JPY is trading at 106.20, down -0.14% on the day, having posted a daily high at 106.39 and low at 106.19.

Overnight, the DXY was on resilient to the ongoing concerns in the Whitehouse and political stance on trade for the most part of the session due to a series of more upbeat data than what has been seen in recent days. In fact, markets took Kudlow's appointment as head of National Economic Council as potentially moderating the influence on Trump's trade stance. However, the news that Mueller has subpoenaed the Trump Organization made for a bout of risk-off in NY. Jobless Claims and Import Prices were positive and the Empire Manufacturing data was also better than expected.

Risk-off is elevated: Mueller has subpoenaed the Trump Organization

The DXY was bid back onto the 90 handle to a high fo 90.16 from 89.62 while US yields climbed from 2.80% to 2.83% in the 10yrs, while 2yr yields rose from 2.25% to 2.29%. The Fed fund futures continued to price three more hikes by end-2018 (with 21 March a 90% chance), and another hike in 2019.

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreetexplainedd that the pair remains at risk of extending its decline, despite the intraday bounce:

"In the 4 hours chart, is still developing below its 100 and 200 SMAs, with both gaining downward traction, while technical indicators have pared losses and aim marginally higher, but remain well into negative territory. The pair still has scope to extend its decline toward 105.24, the multi-month low set last February."