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  • USD/JPY finds a floor amid trade deal optimism.
  • The yen buoyed by BOJ’s stimulus view and firmer Japanese CPIs.
  • Dollar index extends weakness amid light trading conditions.

USD/JPY is trying hard to extend the tepid bounce above the midpoint of the 109 handle amid a better risk environment, driven by fresh US-China trade optimism.

Over the past couple of days, both China and the US have made upbeat remarks concerning phase one trade deal signing. China’s Commerce Ministry said it is in close touch with the US on a trade deal signing ceremony.  The Asian equity markets reached 18-month tops while S&P 500 futures trade 0.13% higher, which is, in fact, helping to limit the downside in the spot.

However, the further recovery in the pair appears difficult for now, as the Japanese yen remains underpinned by the above-forecasts Japanese CPI figures and Bank of Japan’s (BOJ) Summary of Opinions released earlier this Friday.

“The Bank of Japan (BOJ) summary of opinions of the December meeting showed the policymakers are not in favor of increasing stimulus and intend to study the side-effects of policy while maintaining the  current monetary easing – negative  rates  and QQE program with yield curve control,” FXStreet’s Analyst, Omkar Godbole, noted.

Further, broad-based US dollar weakness amid risk-on market profile and weaker Treasury yields continue to keep a check on the recovery. The greenback failed to draw any inspiration from the latest solid US consumer spending data and the rally in the US stocks, as the US-China trade optimism weighs negatively on its safe-haven appeal.

Looking ahead, amid a lack of significant US macro news and holiday-thinned trading conditions, the major will closely follow the trade-related developments and USD price-action.

USD/JPY Technical levels to consider