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  • JPY loses strength as market sentiment improves in American session.
  • Wall Street’s main indexes turn positive after opening deep in red.
  • US Dollar Index pulls away from lows after upbeat PMI data.

The USD/JPY pair rose above the 108 handle during the early trading hours of the American session and continued to push higher as the improving market sentiment made it difficult for the JPY to find demand as a safe-haven. As of writing, the pair was up 0.25% on the day at 108.35.

In the absence of fresh developments that could hint at a further escalation of the conflict between the United States and Iran, the market mood turned positive in the second half of the day. Additionally, White House adviser Conway said that it was still possible for the US to renegotiate a nuclear deal with Iran.

After opening deep in the negative territory, Wall Street’s main indexes climbed into the positive territory and the 10-year US Treasury bond yield, which slumped to its lowest level in a month at 1.757%, retraced its intraday drop and was last flat at 1.795%. 

USD capitalizes on strong PMI reading

In the meantime, the IHS Markit’s December Services PMI (final) came in at 52.8 in US to beat the market expectation of 52.2 and showed an expansion of activity in the sector at an accelerated pace. The US Dollar Index staged a modest rebound following the data and helped the pair cling to its recovery gains. As of writing, the index was still down 0.25% on the day at 96.65.

On Tuesday, the Jibun Bak Services PMI from Japan and the ISM Non-Manufacturing PMI from the US will be looked upon for fresh impetus.

Technical levels to watch for