- USD/JPY has been stable in the Tokyo open following a strong equities market overnight and lower US yields in contrast.
- “To gain bearish traction, the pair would need to break below 112.95, with scope then to extend its decline down to 112.55.”
USD/JPY has been stable in the Tokyo open, after drifting a touch lower and below its North America session high up at 113.69. The pair has been one of the less active than elsewhere considering the positive implications for risk, that weighs on the ye, yet strips the dollar od the trade war bid since Trump and Xi have called a temporary ceasefire for 90 days while they engage in trade talks once again. As a result, global stocks are elevated. However, in contrast, US yields tumbled overnight.
- Wall Street closes in a sea of green following relief rally on trade war ceasefire; DJIA eyes the 76.4% Fibo
The US 10yr treasury yield fell from 3.05% to 2.99%, 2yr yields from 2.84% to 2.82%. The street figures that the Fed is on the path to curtailing its interest rate hike policy as it moves in on its neutral target rate, that seems to have come along a lot sooner than what the Fed had projected, as little as a month ago when Powell wasn’t particularly confident that the Fed was so close. Those comments back on October came in stark contrast t his latest speech, where last week he signalled that the Fed was now data dependent and not far off from reaching the target rate. Fed speakers overnight tallied up with that sentiment, although for the most part were mixed in their rhetoric. Vice Chairman Clarida, said the economy is in good shape and that an inflation overshoot was permissible; Governor Quarlesargued that the neutral rate is not a precise concept and Governor Brainard said the economy is at or beyond full employment. The Fed fund futures continued to price the chance of the next rate hike on 19 December at 80%. (Meanwhile, it has been announced that money and bond markets would be closed Wednesday for the national day of mourning for former President George H. W. Bush).
USD/JPY levels
- Support levels: 113.35 112.95 112.55
- Resistance levels: 114.10 114.50 114.90
Valeria Bednarik, Chief Analyst at FXStreet explained the technical outlook:
“The 4 hours chart shows that the 100 and 200 SMA remain directionless below the current level, although the shorter one provided a short-term support, now at around 113.35. Technical indicators in the mentioned time-frame are now developing within positive levels, but lacking directional strength, as demand for the greenback is quite limited. The pair peaked last week at 114.03, and a firm recovery above this level could result in a test of October high at 114.54. Gains beyond this last, however, seem unlikely in the current environment. To gain bearish traction, the pair would need to break below 112.95, with scope then to extend its decline down to 112.55.”
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