USD/JPY sticks to modest gains near YTD tops, just above 111.00 handle

   “¢   Fading safe-haven demand continues to weigh on JPY and remained supportive.
   “¢   The USD bulls digest the post-US CPI uptick and failed to provide fresh impetus.
   “¢   Traders now look forward to the US economic releases – retails sales and PPI print.

The USD/JPY pair now seems to have entered a bullish consolidation phase and was seen oscillating in a narrow trading band, just above the 111.00 handle, or YTD tops.

A combination of supporting factors helped the pair to quickly reverse an early Asian dip to the 110.85 region and regain some positive traction. The prevalent risk-on mood got an additional boost after a Bloomberg report indicated that the US President Donald Trump is considering extending the March 1 tariff deadline by 60 days. The news added to the recent optimism over a possible resolution of US-China trade disputes and was eventually weighed on the Japanese Yen’s safe-haven status.  

The JPY bulls seemed rather unimpressed by today’s release of the prelim GDP growth figures from Japan, showing that the economy is estimated to have expanded by 0.3% q/q in the last quarter of 2018. The reading was largely negated by a downward revision of previous quarter’s already weaker reading, now showing a contraction of 0.6% as compared to 0.3% reported previously.

As Neil MacKinnon, Global Macro Strategist at VTB Capital explained:  “The major central banks face a challenge now in how to combat either the next recession or the next financial crisis. Both the ECB and BoJ have been unable to move away from negative benchmark rates and therefore would seemingly have little monetary ammunition left. The experience of Japan is instructive, and while the BoJ has actually been at the vanguard of unconventional monetary policies since the early 1980’s, these policies have failed to deliver what was promised. Indeed, the BoJ seems stuck in an endless loop of repeating variants of the same policies without success.”

Meanwhile, the US Dollar was seen digesting the overnight gains led by slightly better than expected US core CPI figures and turned out to be the only factor that failed to provide any fresh bullish impetus to the major, leading to a subdued/range-bound price action through the early European session.

Moving ahead, today’s US economic docket, featuring the key release of monthly retail sales data and the latest PPI print, will now be looked upon for some fresh impetus later during the early North-American session.  

Technical levels to watch