USD/JPY: slowly extending yearly rally
|USD/JPY Current price: 110.67
- Japanese data once again missed the market's expectations.
- Dollar´s gains backed by soft European data, US inflation up next.
The dollar remained pressured early Asia but resume its advance ahead of London opening, resulting in the USD/JPY pair reaching fresh 2019 highs at 110.76, now trading a handful of pips below the level. Speculative interest returned to the greenback following another batch of disappointing data coming from the EU and the UK, which revived the usual concerns about slowing economic growth and Brexit uncertainty. The positive momentum could also be attributed to the technical breakout of the 110.00 level, as the pair, once into a trend, tends to respect it.
Data coming from Japan once again failed to impress, as the Domestic Corporate Goods Price Index fell 0.6% in January vs. the -0.2% expected, while the YoY reading posted a modest 0.6% advance, below the previous 1.5% and the forecasted 1.1%. The US will present today January inflation data, expected to have risen yearly basis by 1.5%, well below the previous 1.9%. The core reading which excludes food and energy prices is expected at 2.1% vs. 2.2% previously. Such a decline will reinforce the Fed's case of being 'patient' with rate hikes and could affect the dollar negatively.
With the pair hovering around the previous high of 110.65, and the pair confined to a measly 30 pips' range ever since the day started, technical indicators in the 4 hours chart lack directional strength but continue developing near their recent highs, the Momentum above the 100 level and the RSI in overbought territory. In the mentioned chart, the 100 and 200 SMA remain below the current level and with the shortest heading modestly higher above the larger one. The 111.00 figure is the next relevant resistance, with further gains expected once beyond it. The downside seems limited by buying interest aligned in the 110.00/10 price zone.
Support levels: 110.45 110.10 109.85
Resistance levels: 111.00 111.45 111.80
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