USD/JPY: On a slippery ground towards 105.00, refreshes monthly low ahead of Fed

• USD/JPY drops to the lowest since August 28 as Japanese trade numbers please Yen buyers.
• Japan’s Merchandise Trade Balance Total beat forecast and prior, Exports also recover in August.
• The pre-Fed risk reset takes clues from trade jitters and virus updates amid a light news feed.

USD/JPY extends the weekly south run to 105.30, down 0.16% intraday, as trading in Tokyo begins for Wednesday. The yen major’s latest catalysts could be Japan’s trade numbers for August. However, the market’s cautious sentiment ahead of the US Federal Reserve monetary policy and trade-negative headlines from the US and Canada also adds to the pair’s weakness.

Another good news from Japan…

After Monday’s upbeat Industrial Production details, the Japanese calendar flashed one more positive sign that the world’s third-largest economy is gradually overcoming the coronavirus (COVID-19) pandemic.

Japan’s August month Merchandise Trade Balance Total rose to ¥248.3 B versus ¥-37.5 B market consensus and ¥10.9 B (revised). Further details suggest the Imports dropped below -18% YoY forecast to -20.8 whereas Exports recovered from -16.1% to -14.8% in the reported month.

The story concerning Canada’s dislike for the US aluminum tariffs seems to get bitter as the Ottawa-Washington travel restrictions extend till October 21 versus the previous deadline of late-September. Further, the World Trade Organization’s (WTO) verdict against the American tariffs on China and the generally observed pre-Fed cautious sentiment also weigh the risk barometers. Elsewhere, the three-week high COVID-19 daily cases from Texas confront vaccine hopes strengthened by the University of Pittsburgh School Of Medicine.

While portraying the market’s mood, S&P 500 Futures and Japan’s Nikkei 225 both drop near 0.15% whereas the US 10-year Treasury yields weaken to 0.674% by the press time.

Looking forward, market players may take intermediate clues from the risk catalysts and the US Retail Sales gearing up to the announcements from the Federal Open Market Committee (FOMC). While the Fed has clearly shown readiness to stay flexible with the inflation target, traders will search for the quarterly forecast for fresh impetus amid the recent recovery in the headlines data.

Technical analysis

With a clear break of the 1.5-month-old ascending trend line, sellers are directed to conquer the August month low of 105.10 and attack 105.00 round-figures.