USD/JPY held up well to a wave of yen-boosting risk aversion over Italy and U.S.-China, as dollar yields remained an attraction for Japanese investors.
This kept intact the view that USD/JPY can still make it to 115 before a more significant correction.
The latest EU-Italy angst and concerns that USMCA may mean the U.S.-China trade war gets hotter sent the yen broadly higher today, but USD/JPY could only muster a minor 38.2 percent retracement of the rise off Friday's low to Monday's high by 113.60. USD/JPY may need some help from ADP and non-manufacturing ISM data on Wednesday to close above 114, but the course remains set for a run at 115 KO options and a confluence of technical targets nearby. Only then would a substantial setback occur to reset overbought daily oscillators and trim excess spec participation.
Keep in mind, USMCA is unlikely to get through Congress this year and may not next year, depending on the results of the November 6 election, and a quick trade deal with China is not expected, so uncertainty around these issues will linger.