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  • USD/JPY rallied on trade deal optimism and higher yields/US stocks.
  • BoJ’s Kuroda said that  the central bank would ease policy further without hesitation if inflation target under  threat.  

USD/JPY is trading around the highs of the day in very thin market conditions and precarious  price action in the US dollar. The yen is the weakest currency across the board and has dropped from 109.35 to 109.68 vs the greenback  on the day.  

A record-high US stock market and solid yields, as well as news over the holidays that China is in close talks with the US regarding a signing ceremony with regards to a so-called phase-one deal and markets,  remain  pegged to the optimism.

US benchmarks print fresh record highs  

As such, while  markets were closed in Europe, Hong Kong and Australia on Thursday  for a holiday,  the US benchmarks have risen sharply higher in thin trading conditions in a Santa Claus rally. The Dow Jones Industrial Average, DJIA, has climbed 74 points, or 0.26% while the  S&P 500 SPX, +0.35%  was up about 10 points, or 0.31%, to touch 3,234 after reaching a record intraday high. The Nasdaq COMPwas up 57 points, or 0.6%, after setting a fresh intraday record.  If the Nasdaq finishes above 9,000 on Thursday, it will have taken 335 trading days to gain a 1,000 points.

Meanwhile, domestically, the Bank of Japan Governor,  Haruhiko  Kuroda, said that  the central bank would ease policy further without hesitation if the momentum toward its 2% inflation goal came under threat, a sign of his readiness to top up its already massive monetary stimulus.

“Uncertainties over the global economy, including developments in U.S.-China trade negotiations, have eased somewhat,”

Kuroda said.

Still, “the BOJ considers that downside risks regarding the outlook for the global economy remain significant.” Kuroda also said the 13.2 trillion yen ($120 billion) spending package the government has rolled out can help spur growth backed by the BOJ’s powerful easing. We will have a barrage of Japnese data today in Consumer Price Index, Unemployment, retail Trade and Industrial Production.  

USD/JPY levels

Valeria Bednarik, the Chief analyst at FXStreet, explains in USD/JPY Forecast: Bulls preparing for a breakout  that the pair “retains a bullish technical stance, as, in the 4-hour chart, the pair is holding well above all of its moving averages, with the 20 SMA heading higher at around 109.45 providing immediate support. Technical indicators in the mentioned chart lack directional strength but remain within positive levels, reflecting the lack of volume but also showing no selling interest around.”