USD/JPY pressured higher as North Korea's hedging unwinds

USD/JPY is trading significantly higher early Monday, testing offers at 108.50 after a Friday's NY close of 107.85. The fact that there were no further developments in the North Korean crisis over the weekend has seemingly induced hedged positions to unwind. 

USD weakness has a temporary respite

The recovery in the Yen crosses comes after 2 days (Thursday and Friday) of intense downside pressure, averaging losses of 100 pips, driven by the dumping of US Dollars in reaction to the ECB policy decision (via EUR strength), the anticipation of negative consequences by Irma Hurricane in the US economy as well as dovish comments by Fed speakers. This week, the main fundamental drivers for USD/JPY traders will be US CPI on Thursday and US retail sales on Friday.

The week ahead in the US: CPI to pick up modestly in August - Nomura 

USD/JPY: Technicals support bearish bias

From a technical point of view, Valeria Bednarik, Chief Analyst at FXStreet, notes: "The pair has room to extend its decline, having settled below the previous yearly low, and with the daily chart showing that the RSI indicator keeps heading south, around 36, as the 100 and 200 SMAs gain downward strength far above the current level."

For the shorter term, Valeria adds: "The 4 hours chart shows that the price is also well below bearish moving averages, whilst technical indicators settled well into the red, after correcting extreme oversold conditions reached at the beginning of the day, also supporting a new leg lower ahead."