USD/JPY retreats from highs, clings to small daily gains around 113.70
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USD/JPY retreats from highs, clings to small daily gains around 113.70

  • US Dollar Index stays in positive territory above 97.
  • Wall Street stays relatively quiet.
  • FOMC members Bostic, Geroge, and Evans to speak next.

The USD/JPY advanced to its highest level since November 14 at 113.84 earlier in the NA session and lost its momentum in the last couple of hours. Ahead of speeches by several FOMC members, the pair is trading at 113.78, gaining 0.17% on a daily basis.

An improved market sentiment and a broad-based USD strength in the second half of the day fueled the pair’s upsurge. After spending the majority of the day above the 97 mark, the US Dollar Index rose to a 2-week high at 97.50 on the back of strong consumer confidence data and hawkish remarks from Richard Clarida, the Federal Reserve’s Vice Chairman, who said that  gradual rate hikes were appropriate “as data shows the way to neutral policy stance.”

  • Fed’s Clarida: Would back more rate hikes than expected if inflation surprised to upside.
  • Fed’s Clarida: Focused on inflation expectations.
  • US: CB Consumer Confidence Index edges down to 135.7 in Nov from 137.9 in Oct.

Additionally, major equity indexes reversed their direction after starting the day in the negative territory and made it difficult for the safe-haven JPY to find demand  amid increasing risk appetite. At the moment, the S&P 500 and the Nasdaq Composite were up 0.2% and 0.45% higher on the day.  

Meanwhile, the weekly CFTC report showed that net JPY short positions fell slightly last week. Commenting on the publication, “The movements in the JPY tend to reflect broad levels of risk aversion, so the fall in shorts should suggest a slight worsening in risk appetite,” said Jane Foley,  Rabobank senior FX strategist.

Technical levels to consider

The pair could face the first resistance at 113.85 (daily high) ahead of 114.20 (Nov. 12 high) and 115 (psychological level). On the downside, supports align at 113.30 (20-DMA), 112.95 (50-DMA) and 112.25 (100-DMA).

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