USD/JPY bulls putting the breaks before 107 resistance following bull spike overnight

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  • USD/JPY giving back some winnings in the Tokyo opening hour.
  • Us announced that dditional tariffs on some Chinese imports will be delayed until December 15.

USD/JPY is currently trading at 106.34, -0.36% on the Asian session so far. USD/JPY soared from 105.40 to a high of 106.98 overnight on US tariff headlines, which made the yen the day’s worst performer following a bounce-back in risk appetite. The US Trade Representative Lighthizer’s office in a published statement, announced that additional tariffs on some Chinese imports, including cell phone and laptop computers, will be delayed until December 15. Subsequently, the Dow Jones Industrial Average, DJIA, put on 382.20 points, or 1.48%, at 26,279.91 for the best performance on a single day in two months. The S&P 500 index added 43.23 points, or 1.5%, to 2,926.32. The Nasdaq Composite index added 152.95 points, or 1.95%, to 8,016.36.

There were also reports that Chinese, U.S. chief trade negotiators held phone talks. China’s Lui He apparently spoke with Lighthizer and Mnuchin. CNBC reported that Lui-Lighthizer talk took place at US’s invitation. Trump also hinted that China has agreed to buy more agricultural products. President Trump announced that he delayed tariffs for Christmas season in case it had an impact on shopping. However, Moody’s has said that they expect relations between the US & China to remain “contentious, punctuated with occasional steps towards compromise.”

US CPI meets expectations

As for US data, the US CPI printed in line with market expectations in July at 0.3% MoM, pushing annual inflation up 0.2%pts from June to 1.8%. 

“Core inflation (ex-food and energy) was a touch stronger than expected, also at 0.3% m/m, which saw the annual measure lift to 2.2% from 2.1% in June. While there appears to be some temporary strength in the details (airline fares, tobacco), two consecutive 0.3% m/m rises for core inflation may give some policymakers cause to believe inflation pressures are a touch stronger than previously assumed,”

analysts at ANZ bank explained. 

As for yields, the US 2-year treasury yields rose from 1.56% to 1.67%, the 10-year yield from 1.62% to 1.70%. “Markets are pricing 26bp of easing at the 19 September Fed meeting, and a terminal rate of 1.13% (Fed funds rate currently 2.13%),” analysts at Westpac argued. 

USD/JPY levels

Valeria Bednarik, the chief analyst at FXStreet explained that the USD/JPY pair has stabilized at around 106.60 during US trading hours, its highest settlement in a week:

“The 4 hours chart shows that it broke above its 20 SMA, now directionless around 105.70, still below bearish 100 and 200 SMA. Technical indicators have pared their advances near overbought levels, anyway leaving doors open for additional gains in the short-term. In the longer run, the advance is a mere corrective, as the bullish case would be more sustainable on a recovery beyond the 109.40 price zone.”

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