FX: Room To Move Lower After USDJPY Stumble?

*JPY falls overnight on Trump developments
*Kuroda's comments tilt dovish
*USDJPY support levels to watch

Sensitive to Trump UN comments

Overnight, risk sentiment was irritated after Trump's confrontational remarks about China and Iran at the UN forum. In his address, Trump handed lashed out and said:

Iran is the "number one state-sponsor of terrorism". He denounced the "bloodthirsty" state and concluded that "sanctions will not be lifted, [but rather] tightened".
China fails to deliver "promised reforms", and instead, embraces a market model that promotes product dumping, currency manipulation, heavy market barriers, state subsidies, forced technology transfer and the "theft of intellectual property".

Trump's comments are a stark reminder of the difficulty in overcoming an extensive list of US demands before a meaningful US-China deal can rubber stamped in October. USDCNH rallied +20pips. Coupled with a host of other headlines - Trump Impeachment and weak US Confidence numbers - risk-off flows saw USDJPY test 107 pushing past key levels with ease.

Kuroda, much of the same

The dovish tilt from BoJ Kuroda's comments also have medium-term implications on USDJPY dynamics but have drawn negligible reactions as of late. Kuroda's comments haven't strayed too far from what's been said previously by the BoJ, where he emphasizes that they won't rule out "cutting negative rates" if the "economy loses momentum for achieving its price goal". It still remains to be seen whether cutting negative rates is viable or not, however, it does leave the BoJ open to a dovish move before the end of the year.

USDJPY looks soft

A couple of points as to why USDJPY could turn lower in the short-term:

USDJPY touched Fibonacci 76.4% (blue line, RHS) around 108 before turning away.
Bearish momentum shown by slow stochastic points down with some way to go before 20.
Smoothed RSI (red line, RHS) in steep decline, not yet in oversold territory.
BoJ are unlikely to cut negative rates until USDJPY weakens significantly (hawkish short-term).
US-China trade remains complicated driving risk-off bias (Yen appreciation short-term).

Levels to watch to the downside: