- U.S. stocks took off on Wednesday, with the Dow Jones Industrial Average reclaiming the 25,000 level for the first time in over a month.
- Solid corporate results and a seemingly accommodative Federal Reserve fueled the moves overnight.
Indeed, the Fed event surprised markets that were positioned for a potentially slightly hawkish outcome which Powell neutralised in his presser and from the statement. The dollar dumped and the yen rallied a full figure vs the greenback despite a surge in stocks.
- The Fed is in no hurry – ING
Markets can now settle in for some potential entertainment from Sino/US trade talks that commenced today in Washington and will continue tonight. There should be some soundbites to work with which will be key for this pair.
Staying with China, we will have the January official manufacturing and non-manufacturing PMIs at the top of the hour. The priors numbers were 49.3 and 53.8 respectively and markets will not like declines, and a combination of bad Sino/US trade talk news will potentially trim global benchmarks down to size, relieving some pain the greenback, but certainly supporting the demand for the safe havens and the yen.
“The US 10yr treasury yield found some help in early NY from strong private sector jobs (ADP) data, but then fell to 2.69% in response to the dovish Fed statement. 2yr yields fell from 2.58% to 2.52%. Futures markets continued to price little chance of any further Fed rate hikes in this cycle, edging up a total of 3bp by Sep 2019 but back to flat by Jan 2020,” analysts at Westpac explained.
USD/JPY levels
- Support levels: 108.60 (S1 confluence 38.2% Fibo) 108.40 108.10
- Resistance levels: 109.05 109.40 109.75
Valeria Bednarik, Chief Analyst at FXStreet explained that the pair is now bearish according to the 4 hours chart:
“The pair broke below the 61.8% retracement of its latest daily slump, also below a directionless 100 SMA, both converging around the mentioned 109.05 level. Technical indicators in the mentioned chart are now below their midlines, although with a limited bearish momentum. Bears could lose their chance if the pair recovers the mentioned level, while below 108.75, the risk skews to the downside short-term.”
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