USD/JPY clings to small gains near 110.80 despite USD weakness

• US 10-year T-bond yield rises 1% on Monday.
• Wall Street opens sharply higher.
• US Dollar Index stays in red.

Although the greenback is struggling to gather strength on Monday, the USD/JPY pair is floating in the positive territory as positive market mood doesn’t allow the JPY to find demand as a safe haven. At the moment, the pair is up 0.1% on the day at 110.80.

Hopes of the U.S. and China reaching a trade deal after President Trump earlier today voiced his willingness to delay the increase in tariffs imposed on Chinese imports boosted the risk appetite. Furthermore, Trump in the last hour reiterated that they were very close to reach a deal with China.  Reflecting the mood, the 10-year US Treasury Bond yield  rose 1% on Monday. Additionally, major equity indexes in the U.S. started the day in the positive territory to help the pair cling to daily gains. At the moment, the Dow Jones Industrial Average and the S&P 500 are up 0.65% and 0.58%, respectively.

Meanwhile, today’s data published by the Federal Reserve Bank of Chicago showed that the National Activity Index dropped to -0.43 in January from 0.05% in December. “The CFNAI Diffusion Index, which is also a three-month moving average, decreased slightly to +0.09 in January from +0.18 in December,” Chicago Fed said.

Later in the session, the Fed’s vice chair Richard Clarida, who last week argued that there were scenarios where the Fed wouldn’t need to make a rate hike in 2019, will be delivering a speech.

Key technical levels

The pair could face the initial support at 110.35 (20-DMA) ahead of 110 (psychological level) and 109.55 (50-DMA). On the upside, resistances could be seen at 110.85 (daily high), 111.20 (100-DMA) and 111.40 (Dec. 26 high).