- 10-year T-bond yield stages strong recovery on Tuesday.
- US stocks futures point to a positive start.
- US Dollar Index suffers small losses, stays above 96.
The USD/JPY pair started the day on a positive note on Wednesday and recovered all of yesterday’s gains boosted by slightly better market sentiment. As of writing, the pair was trading at 109.75, adding 0.35% on a daily basis.
The sharp dropped witnessed in the major equity indexes in the U.S. following reports of Trump administration cancelling a meeting with Chinese officials on Tuesday forced the pair to close the day in the negative territory. Later in the evening, White House economic advisor Kudlow denied the reports and now investors are waiting to see Wall Street’s reaction. Meanwhile, S&P Futures are up 0.4% on the day, suggesting that stocks are likely to open in the positive territory. Furthermore, a more-than-1% increase in the 10-year US T-bond yield confirms the improved sentiment, which could help the pair push higher in the second half of the day.
Earlier in the day, the BoJ kept its policy rate unchanged as expected. While speaking in a press conference, Governor Kuroda reiterated that the bank was ready to take additional measures if needed while pointing out that falling energy prices as the primary reason behind the downgrade to the inflation outlook.
The only data release from the U.S. on Wednesday will be the Richmond Fed’s Manufacturing Index. At the moment, the US Dollar Index is down 0.06% on the day at 96.25. A strong upsurge seen in the GBP/USD pair seems to be hurting the demand for the greenback.
Technical levels to consider
The pair could face the initial resistance at 110 (psychological level) ahead of 110.45 (Dec. 31, 2018, high) and 110.90 (50-DMA). On the downside, supports align at 108.80 (20-DMA), 108.40 (Jan. 16 low) and 108 (psychological level/Jan. 14 low).
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