USD/JPY climbs to fresh daily highs above 108.70 on upbeat US data

• US Pres. Trump says trade deal with China is “potentially very close.”
• Upbeat Manufacturing PMI and UoM Consumer Sentiment data boost USD.
• US Dollar Index climbs to fresh weekly highs near 98.20.

After edging down to 108.50 area in the early trading hours of the American session, the USD/JPY pair reversed its direction and advanced to a fresh daily top of 108.73 but seems to be having a difficult time stretching higher as investors continue to react developments surrounding the United States (US)-China trade dispute.

Earlier in the day, US President Donald Trump said a trade deal with China was “potentially very close” to cause safe-haven assets such as the JPY to lose interest. The 10-year US Treasury bond yield, which lost as much as 2% earlier in the day, erased almost all of its losses on Trump’s comment.

However, following a Reuters report suggesting that all five commissioners of the US  Federal Communications Commission (FCC) will vote to bar Chinese telecommunication giant Huawei and ZTE from government subsidy programs, the 10-year US T-bond yield lost its traction and was last down 1% on the day, suggesting that risk sentiment has started to sour on this headline.

Reflecting the shift in the market mood, the USD/JPY pair turned flat on the day near 108.60 and is looking to close the second straight week in the negative territory.

USD strength helps pair stay above 108.50

On the other hand, the IHS Markit’s Manufacturing Purchasing Managers’ Index (PMI) rose to 52.2 in November’s preliminary reading to surpass the market expectation of 51.5 and provided a boost to the greenback. Additionally, the University of Michigan’s Consumer Sentiment Index improved to 96.8 in November to support the US Dollar Index, which was last up 0.25% on the day at 98.20.

Technical levels to watch for