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  • Manufacturing PMI data from the U.S. disappoint.
  • US Dollar Index clings to small daily gains above 96.
  • 10-year T-bond yield extends rally into 3rd straight day.

The USD/JPY pair rose to its highest level since mid-December to test the 112 handle earlier in the day but failed to break it and started to consolidate its daily gains. As of writing, the pair was up 0.3% on the day at 111.70.

Today’s data from the U.S. revealed that the core PCE price index on a yearly basis, the Fed’s favoured gauge of inflation, stayed unchanged at 1.9% in December as expected. Although the greenback didn’t react to this data, it pulled away from session highs after the Manufacturing PMI data published by the ISM and the IHS Markit both fell short of the analysts’ estimate to suggest that the activity in the sector expanded at a slower pace than anticipated. The US Dollar Index, which touched a daily high of 96.39, was last flat on the day at 96.22.

Meanwhile, the 10-year US T-bond yield is posting gains for the third straight day to help the pair cling to its daily gains. Additionally, major equity indexes in the U.S. started the day in the positive territory but retreated from their daily highs in the last hour to suggest that the risk-on mood is losing its control over the price action.

Later in the session, Atlanta Fed President Bostic, who several times said that he would support one rate hike both in 2019 and 2020, will be delivering a speech.

Technical outlook

If the pair manages to close the week above 111.50, where the 200-DMA is located, buyers could remain in the driver seat. On the upside, resistances are located at 112 (psychological level/daily high), 112.60 (Dec. 20, 2018, high) and 113.50 (Dec. 17, 2018, high). On the other hand, supports could be seen at 111.50 (200-DMA), 111.10 (100-DMA) and 110.60 (20-DMA).