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  • USD/JPY remains under pressure despite firm stocks and USD.
  • Yen to collect safe-haven demand should tensions between US and China rise in 2020.
  • The pair is pressured below the 200-DMA.

Yen has caught up to its peers, surging against the USD which up until today had been the laggard over these holidays. USD/JPY is currently trading at 108.55 having travelled from a high of 108.86 to a low of 108.21. 

The yen has been caught in the crossfire of both Brexit headlines and late as the US-China trade deal was signed off by President Trump which has pathed the way for a signing ceremony between the US and China in coming days.  

Phase-one trade deal with China had “great stuff in it”

One of President Donald Trump’s top trade advisers told CNBC earlier this week that a phase-one trade deal with China had “great stuff in it.” Peter Navarro’s comments came before Trump tweeted that he would sign the “phase one” trade deal with China on January 15.

“I’m seeing closer to 3% real GDP growth than 2%,” Navarro said. “I’m seeing at least 32,000 on the Dow.”

Domestically, Governor Kuroda recently referred to the global economic outlook for 2020 as “bright”. However, the deputy, Masayoshi Amamiya, recently said that the central bank is ready to add more stimulus if downside risks rise. 

“We struggle to see any room for a material surprising tilt in the BoJ stance this week, which means the yen is unlikely to find anything to grab on to avert another unhappy week. USD/JPY to break above 110,” analysts at ING Bank argued. 

However, looking ahead to 2020, analysts at Rabobank still expect another surge of safe haven demand for the yen based on expectations of another rise in tensions between the US and China. “On the margin the JPY may also find some support in the view that the bar to further BoJ rate policy easing has been raised.”

USD/JPY levels

The pair is pressured below the 200-DMA and has pierced a 23.6% Fibonacci retracement level.  “Attention has reverted to the 108.43 December low, which is exposed. We look for losses to the 107.89 November low and then the 106.48 October low and eventually the 105.00 region,” analysts at Commerzbank argue.