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  • USD/JPY extends pullback amid upbeat data from Japan.
  • Optimism surrounding the US-China trade deal, increasing odds of BOJ’s sustained support for easy money keep the pair firm.
  • Trade/political headlines will entertain investors amid the year-end sparse trading.

USD/JPY steps back to 109.55 surrounding Friday’s Tokyo open. The pair recently took note of headlines data, BOJ Summary of Opinions while trimming some of its latest gains.

Mostly positive data, mixed statements from BOJ Summary of Opinions”¦

Japan’s data dump recently flashed positive signs with the headline inflation gauge, namely Tokyo Consumer Price Index (CPI) ex Fresh Food rising well beyond 0.6% forecast and prior to 0.8% on YoY basis during December. On the other hand, Retail Trade and the preliminary Industrial Production for November flashed mixed readings as the former lagged behind -1.7% forecast to -2.1% whereas the later improved to -0.9% MoM from -1.4% anticipated.

Bank of Japan’s (BOJ) summary of opinions for the December monthly meeting was also released side-by-side the data. The statement suggests that the policymakers cite the coexistence of both downside and upside risks with downside risks remain at high levels. They also mention that it remains difficult to be optimistic about developments in Japan’s economic activity and prices on the whole.

Recently, the BOJ Governor showed readiness to take additional monetary policy actions if the economy softens further. The recent data and BOJ Summary of Opinions seem to have cut the odds favoring such action.

On the trade/political front, comments from the US President Donald Trump and Chinese diplomat have recently shown nearness to phase-one signing and the same has boosted the market’s risk appetite. Wall Street benchmarks extended their record run with the NASDAQ closing beyond 9,000 for the first time ever.

With most data/events out, the global economic calendar has nothing major to share during the last days of 2019. As a result, markets will be keen to look for trade/political headlines for fresh impulse.

Technical Analysis

Bulls will look for a sustained break of 110.00 to aim for May month high surrounding 110.70. On the downside, 200-day Simple Moving Average (SMA) near 108.70 offers strong support to the quote.