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  • On a weaker euro post the ECB outcome and Trump as seen with the upper hand when it comes to trade wars following the quick deal done with the EU this week.
  • The dollar has the advantage as the Fed expectations come back to the fore and USD/JPY regains the 111 handle.

Currently, USD/JPY is trading at 111.12 having made a high of 111.24 and a low of 111.09. Overnight, the USD/JPY was showing signs that its six-day correction of the uptrend was ending back above 111.00.  

Despite disappointments in Durable goods orders that rose by 1.0% in June and well short of the market consensus for a 3.0% advance and Jobless claims that also rose to 217k with 215k expected, the dollar was firm. Instead, the DXY rose within a range between 94.0840-94.7950 after the ECB explained that more accommodation was needed and US yields were firmer with the 2-yr yield climbing to the highest in ten years with the odds of a fourth hike from the Fed back in as a prominent theme in the markets currently.  

GDP to steepen Fed funds hiking path   – (Standard Chartered Bank)

“Investors expect Q2-2018 GDP (to be released on 27 July) to show meaningful acceleration in real activity. But whether this strength can be sustained, and what the associated monetary policy response might be, remain open questions. Our core scenario is a ‘sugar rush’ from fiscal stimulus in 2018 and at least part of 2019, with a relatively sharp growth deceleration thereafter. This would entail a temporary spike in real activity and a relatively steep fed funds hiking path, as well as an earlier downturn in the business cycle, likely in late 2019 or early 2020,”

– analysts at  Standard Chartered Bank explained.

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that in the 4 hours chart, the pair is half-way between its 200 and 100 SMA: “technical indicators present upward slopes, but so far hold within neutral territory, leaning the scale toward the upside for the upcoming sessions.” The 110.66 and trendline support has held and the 200-week moving average is located at 113.22 as a key upside target, just above is where the 61.8% of the 2016-18 drop at 113.27-28 is located and then the 2018 high comes ahead of the 114.73 November 2017 high comes into play.