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  • USD/JPY has started to break down the 114 barrier and made a fresh high of 114.03, the highest level since 12th Nov.
  • DXY is chipping away at the upside, making a fresh high of 97.53 ahead of Powell’s speech at the top of the hour.

USD/JPY has been firm and making tracks to the upside since the 19th Nov. where the pair rallied from 112.30, (76.4% Fibo retracement level of the 2018 sell-off to 2018 lows). At this rate, the pair is on track to target R3 at 114.38 so long as the greenback can survive whatever may come of Powell’s speech at the top of the hour to the Economic Club of New York. There should be some interesting clues about the Fed’s view of the US economy and rate hike intentions for 2019. However, his comments will also be closely scrutinised for anything that could signal a pause in December.  

DXY has been performing – yield  spread  matters

As far as the DXY has been performing, it has been travelling from 96.41 last Friday to a fresh high scored today at 97.53, (yesterday’s high was 97.50). We are coming into month end with just a few weeks to go until the end of the year, Typically, the greenback catches a bid on repatriation year-end flows, which could be helping the index higher.  

However, with the number of geopolitical risks and outright concerns over global economic growth, the dollar has come back under demand while investors have little to choose from elsewhere. So long as the Fed / BoJ divergence and yield spreads remain a theme, the dollar has the advantage – (The US 10 year treasury yield is currently at 3.068%, up from a low of 3.051%).

USD/JPY levels

  • Pivot point support levels: 113.52, 113.25 and 113.09.
  • Pivot point resistance levels:  114.11 and 114.38.

USD/JPY bulls are looking to dig their hooves in on the 114 handle, pawing the grounds ahead of a charge towards the midpoint of the 115 handle for the final weeks of the year. To the  upside, a break of 114.45 could be last major defence until 115 the figure and then l 115.60 as being a critical 61.8% Fibonacci level. To the downside, a break below 113 opens prospects of a test of the 112.16 cloud support and a break there would suggest a target of the 110.26/109.77 200-D SMA and August lows.