- Positive market sentiment helps USD/JPY climb higher on Friday.
- Broad-based USD weakness caps the pair’s gains.
The USD/JPY traded in a relatively tight range on Wednesday and Thursday and struggled to make a decisive move in either direction. Boosted by higher risk appetite today, the pair climbed higher toward the critical 110 mark but failed to gather enough strength to break above that level. As of writing, the pair was trading at 109.85, adding 0.2% on a daily basis and staying in the upper half of its weekly range.
Despite disappointing macroeconomic data reading from Germany, hopes of British PM May’s Brexit Plan B passing through the Parliament next week helped European stock markets stage a decisive rebound on Friday with both Germany’s DAX and the Euro Stoxx 50 looking to close the day more than 1% higher. Additionally, the S&P 500 Futures is also taking advantage of the risk-positive environment and adds nearly 1% ahead of Wall Street’s opening bell.
However, the fact that the greenback is weakening sharply against the euro on Monday weighs on the overall demand for the buck and makes it difficult for the pair to preserve its bullish momentum. At the moment, the US Dollar Index is down 0.4% on the day at 96.17.
There won’t be any macroeconomic data releases from the U.S. on Friday and markets are likely to remain focused on risk perception.
Key technical levels
With a daily close above 110 (daily high/Jan. 23 high/psychological level), the pair could target 110.75 (50-DMA) and 111.50 (100-DMA). On the downside, support could be seen at 109.60 (daily low), 108.90 (20-DMA) and 108.20 (Jan. 15 low).
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