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USD/JPY struggles around 110.00 amid broad USD strength, crisis in Libya

  • USD/JPY seems to lack ammunition as traders look for clear direction amid mixed plays.
  • Oil export blockage in Libya, the US dollar’s broad strength keep traders worried.
  • Japanese Industrial Production in focus, for now, trade/political news to keep the driver’s seat.
  • The US markets are off due to Martin Luther King’s Birthday.

USD/JPY seesaws near 110.00 during the early Monday morning in Asia. The Pair initially reacted to the risk-off moves, due to weekend news from Libyan, by declining to 110.05 from Friday’s close near 110.15. Though, follow-on bounces fail to portray the market’s risk aversion that generally weighs on the pair.

Libya renews risk aversion…

There’s no dearth of power show in the Middle East and this time it’s Libya that cast traders’ minds back to 2011. The oil-rich nation is undergoing a power play where one of the top leaders, Khalifa Haftar recently blocked the country’s exports by 800,000 barrels per day.

Libya recently unseated Iran while the alarming geopolitical risk to the global economy. Although Tripoli seems to have a little strength, as compared to Iran, it still poses a major risk to oil prices. It should also be noted that the beginning of US President Donald Trump's impeachment trial from Tuesday will also be the key to watch.

Read: What you need to know for the open: Eyes on oil, central banks and US pres. Trump's impeachment trial

The recent headlines from Berlin, where global leaders including the United Nation’s Secretary-General Antonio Guterres gathered to discuss the peace solution, signal that major powers will not interfere in the situation. This avoids the fears of the 2011 repetition when western powers took control while overthrowing Col. Muammar el-Qaddafi. Even so, none of the Libyan opponents talked to each other and keep the risk of further plays alive.

BOJ minutes will be in the spotlight…

The BOJ’s two-day monetary policy meeting, beginning Monday, isn’t expected to offer any surprises as nothing major happened after December meeting. With this, traders will emphasize on Friday’s BOJ minutes as the latest meeting released quarterly economic forecast and forward guidance.

While soft inflation will keep BOJ to extend its easy-money policies forward, the tone of the central banker will be the key to observe in the minutes' statement.

Read: BoJ Minutes Preview: Little fanfare expected, dovish bias to persist, USD/JPY at a crossroads

For the day, Japan’s November month Industrial Production, expected to remain unchanged at -8.1%, will be the key amid the US markets’ off. However, developments surrounding the US-China trade talks and Libya will be the key to watch.

Technical Analysis

FXStreet’s Ross J Burland cites spinning top and nearness to short-term channel resistance as portraying a bearish correlation.

USD/JPY has surged in recent days to meet a monthly resistance line established in October 2018 that has the confluence of the 50-month moving average, a firm resistance zone between 109.80 and 110.29. A break of the resistance would be significant and set the stage for a sustained uptrend, initially targetting the 110.50s, 111 the figure, 112.50s. 

 

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