USD/JPY: better bid on the sessison so far, but is...a break of 108 more likely?

Currently, USD/JPY is trading at 108.38, down -0.06% on the day, having posted a daily high at 108.49 and low at 108.25.

US Pres. Trump: Military action would certainly be an option in N.Korea

USD/JPY is slightly bid in the opening hour of the Tokyo session, despite the Nikkei opening to the downside and Wall Street failing to preserve the early momentum and closing the day lower. 

Wall Street pares early gains as market sentiment weakens

Japanese GDP was a miss on all parts apart from the deflator but ignored by markets, focused on US politics and geopolitical tensions with N.Korea, both of which added to the downfall of the dollar overnight that had USD/JPY down a cent on the day, making for just a minor bounce from 108.04 lows.

Spreads are key at this juncture and there are growing concerns that the Fed is not about to change its policy at this month's meeting around, let alone later on in the year in December.  

U.S. Senate passes disaster aid, govt. funding, higher debt ceiling - Reuters

"Fed fund futures yields fell, now pricing the chance of a December rate hike at around 31% (from 36% yesterday)," noted analysts at Nomura, adding, "It’s unclear how much of that repricing is due to the ECB-inspired fall in yields rather than yesterday’s US debt ceiling extension (which pushes out the negotiation to December when the Fed was expected to hike)."

USD/JPY levels

Valeria Bednarik, chief analyst at FXstreet explained that from a technical point of view, and despite the 50 pips recovery, the risk remains towards the downside and there are no signs of a bottom. 

"In the 4 hours chart, the price is further below bearish 100 and 200 SMAs, whilst the Momentum indicator has turned flat within a negative territory, and the RSI indicator barely bounced from oversold readings. Another round of selling that sends the pair below 108.10 should lead to a new leg lower, towards the 107.30/70 region," Valeria explained.

Continue to expect broad dollar depreciation - Nomura