The pair is retracing some of its overnight gains as the yen holds firmer amid weaker bond yields while the aussie is weaker after poor Chinese data earlier in the day.
The move higher overnight stalled at the 38.2 retracement level of the swing move lower since the end of July with the lows last week close to hitting the January flash crash low.
Of note, price is now holding above the key hourly moving averages and that is keeping buyers in near-term control. The 100 and 200-hour MA (red and blue lines respectively) are now the defining risk levels for buyers.
Meanwhile, any topside move needs to get above the 38.2 retracement level seen above to gain further momentum.
Looking ahead, markets appear to be more cautious today following the optimistic trade headlines overnight. There is good reason to expect that trade negotiations will still lead to minimal progress but at least things aren't getting worse for now.
I reckon that's in part helping to see risk sentiment pull back a little today after the move yesterday. As such, keep that in mind ahead of North American trading as the risk mood will still remain a key factor influencing prices/sentiment.
Also just be wary that tomorrow we will have the Australian labour market report release tomorrow. With the RBA putting heavy emphasis on this data, it will be a key risk event in determining the central bank's potential action at its September meeting.
In my view, the pair has limited scope to gain in the long-run but given overnight developments, more supportive technicals could lend a helping hand for a move higher in the short-term.