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USD/JPY advances above 108 as 10-year US T-bond yield refreshes monthly highs

  • 10-year US Treasury bond yield gains more than 2.5%.
  • Renewed trade optimism boosts risk appetite in the NA session.
  • US Dollar Index stays in the negative territory near 98.30.

After testing the 107.50 handle during the early trading hours of the American session, the USD/JPY pair reversed its course and rose above the 108 mark as the improving risk sentiment caused investors to move away from the safe-haven JPY.   As of writing, the pair was up 0.27% on the day at 108.10.

Trade headlines steal the spotlight  

Earlier today, US Treasury Secretary Mnuchin said that they were looking forward to making ‘meaningful progress’ in trade talks with China in the next couple of weeks to revive hopes of the trade conflict coming to an end before escalating any further. Additionally, Bloomberg in a report claimed that Trump administration advisers were considering the option of offering China an interim trade deal in order to secure agricultural purchases with an exchange for delaying tariffs.  

Although White House quickly denied the report, risk-on flows continued to dominate the market action. Finally, citing a person familiar  with the discussions, Politico claimed that President Trump’s top economic advisers were trying to bring back the deal that they have negotiated with China back in May with an aim to prevent the next set of tariffs going into effect in December.

Reflecting the upbeat market mood, the 10-year US Treasury bond yield climbed to its highest level since early August and was last up 2.7% on the day at 1.784%. Furthermore, Wall Street’s three main indexes all add more than 5% to confirm the positive sentiment.

On the other hand, the US Dollar Index remains on track to close the day in the negative territory despite today’s upbeat inflation data from the US, which showed that the annual core Consumer Price Index (CPI) rose to its highest level in more than 10 years at 2.4% in August, and caps the pair’s upside for the time being.

The sharp upsurge witnessed in the EUR/USD pair following the mixed initial reaction to the European Central Bank’s monetary policy announcements today seems to be the primary reason behind the broad USD weakness.  

Technical levels to watch for


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