A sense of caution enveloped financial markets on Tuesday amid reports of military tensions between China and Taiwan. The negative mood weighed on global equities while boosting appetite for safe-haven currencies.

Our currency spotlight shines on the Japanese Yen which has appreciated against most G10 currencies today.

Yen bulls could remain in the scene if U.S. Treasury yields decline further.

USDJPY blocked below 109.686?

It was not only the Japanese Yen that derived strength from the market caution. The Dollar has also dominated the G10 space today, appreciating against major peers including the Yen.

Given how the risk-off sentiment is supporting both currencies, a technical move could be needed to determine the USDJPY’s near-term outlook. There seems to be some layers of resistance around the 109.686 and 109.30 regions. Sustained weakness below these levels could encourage a decline towards 108.30 and possibly lower.

EURJPY: Technical pullback or start of a downtrend?

Taking a look at the technical picture, the EURJPY is heavily bullish on the daily charts. There have been consistently higher highs and higher lows while the MACD is trading comfortably above 0.

A technical pullback is in the works with 130.60 acting as potential dynamic support for bulls to push prices back higher. However, if this level proves to be unreliable support, a decline back towards 129.70 could be on the cards. Such a move may threaten the current uptrend and invite bears back into the game.

GBPJPY breakout on the horizon?

The currency pair has formed a symmetrical triangle pattern on the daily charts. This pattern either signals a continuation of the current trend or the start of a new trend in the opposite direction.

Given how prices are trading above both the 50-day and 100-day Simple Moving Average, the technicals swing in favour of bulls. However, an appreciating Japanese Yen could throw a proverbial wrench in the works, opening the doors for bears. A breakdown below the 50-day Simple Moving Average could result in a sell-off towards 148.50. If this level is cracked, the GBPJPY will turn bearish on the daily charts. Alternatively, a strong move back above 153.40 will most likely signal further upside.

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