USD/JPY inches higher toward 109 on upbeat market mood

• US and China are reportedly closing in on phase one trade deal.
• 10-year US Treasury bond yield stays in positive territory Monday.
• Wall Street’s main indexes look to open with modest gains.

The USD/JPY pair gained traction in the last hour and touched its highest level in a week at 108.95 as the latest headlines surrounding the United States (US)-China trade conflict caused safe-haven assets such as the JPY to lose interest. As of writing, the pair was up 0.23% on the day at 108.90.

Can December tariff hike be avoided?

The closely-watched Chinese news outlet, the Global Times, reported that the US and China were closing in on finalizing phase one of the trade agreement despite differences over the scale of tariff removals. Reflecting the upbeat market mood, the S&P 500 futures are up 0.3% on the day to suggest that Wall Street’s main indexes will be in the positive territory at the opening bell. Additionally, the 10-year US Treasury bond yield, which closed 3.7% lower last week, is up around 0.5% on the day.

Over the weekend, China’s decision to increase  penalties for theft of Intellectual Property (IP) was seen as a move to please the US ahead of the scheduled tariff hikes on December 15th.

Meanwhile, the US Dollar Index is clinging to last week’s gains near the 98.30 mark on Monday to help the pair remain bullish. The Federal Reserve Bank of Chicago’s National Activity Index fell to -0.71 in October from -0.45 and missed the market expectation of -0.43 but was largely ignored by the market participants.

Later in the session, the Federal Reserve Bank of Dallas’ Manufacturing Index will be looked upon for fresh impetus.

Technical levels to watch for