USD/JPY: Flat in Tokyo as markets look for trade-deal clarity

• USD/JPY maintains a bullish bias above the 50-DMA.
• Trade war headlines were mixed, making for a slightly firmer dollar while US stocks sunk.

At the time of writing, USD/JPY is flat around 108.60 trading ina narrow 10-pip range following a mixed session overnight  for financial markets. where USD/JPY ranged between 108.46 and 108.70.

The main headline came from the South China Morning Post, in an article entitled, “China watching Donald Trump’s response to US Hong Kong bill as it threatens to become new barrier to trade deal,” and bullet points as follows:  One source says Beijing may decide to ‘fight and talk alternatively’ and is now closely monitoring the US president’s next move following the vote by Congress; China reacted angrily to the proposals, accusing Washington of interfering in its internal affairs, and may feel obliged to respond.

Subsequently, the dollar floated a little higher while the US 2-year Treasury yields rebounded off 1.55% to 1.60%. The 10-year yields  climbed  from 1.71% to 1.78%. Markets are pricing a terminal funds rate of 1.20% (vs 1.63% currently).

US stocks closed modestly lower with the Dow Jones Industrial Average, DJIA, losing  54.8 points, or 0.2%, to 27,766.29 while the S&P 500 dropped back 4.92 points, or 0.2%, to 3,103.54. The Nasdaq Composite index fell 20.52 points, or 0.2%, to 8,506.21 having closed at its highest levels at the start of the week

Japan October CPI  

The Japan October Consumer Price Index  was  expected to tick up fractionally, to 0.3% YoY  overall, 0.6% YoY  ex-fresh food & energy. The data arrived as follows:  Japan CPI  (Y/Y) Oct 0.2% (est 0.3%; prev 0.2%) – Japan CPI Ex. Fresh Food (Y/Y) Oct 0.4% (est 0.4%; prev 0.3%) -Japan CPI Ex. Fresh Food And Energy (Y/Y) Oct 0.7% (est 0.6%; prev 0.5%).

Full report

The  consumer price index  for Japan in October 2019 was 102.2 (2015=100), up 0.2% over the year before seasonal adjustment, and the same level as the previous month on a seasonally adjusted basis.

USD/JPY levels

Chief analyst at FXStreet, Valeria Bednarik, explained that the technical perspective remains neutral in the 4-hour chart, with flat  indicators, while the spot consolidates below the 100-period SMA but above the 20- and 200-period ones:

“In the daily chart, the perspective has improved slightly but remains overall neutral. As mentioned in previous updates, a break below 107.70 (100-day SMA) or above 108.95 (200-day SMA) could propel a decisive move for the pair.”