USD/JPY bulls eye a break onto 108 handle

• Bulls seeking a break onto the 108 handle on test of 107.90s.
• DXY was marginally higher on the day, scoring fresh highs.

USD/JPY has been trading between 107.66 and 107.85 in Asia, a touch lower on the session so far, -0.12% at the time of writing. 

USD/JPY was heavy overnight but managed to hold in the 107.80/90 territory despite the uncertainties around trade relations between the US and China and mixed equities. The yield on the US 10-year note fell 5bps to 1.69% and the DXY was marginally higher on the day, scoring fresh highs in the upside reversal of the start of September's sell-off.  

US data

Data was second tier, but there was a third estimate of quarter-2 Gross Domestic Produce which remained at an annualised 2.0% while the core PCE price component lifted to 1.9% (prior 1.7%) annualised. "The Aug US goods trade balance data was much as expected at –USD72.8bn, with a notable lift in consumer and capital goods suggesting a push to beat tariffs on Chinese good," analysts at Westpac noted.

We heard again from Federal Reserve speakers, with Minneapolis Fed President Kashkari who argues for steeper rate cuts. "Vice Chair Clarida thought inflation was close to target and Dallas’s Kaplan said trade uncertainty was affecting business investment and Richmond’s Barkin said he has a balanced stance on policy," the analysts at Westpac informed, noting that markets are pricing 14bp of easing at the 31 October meeting and a terminal rate of 1.16% (vs 1.88% currently).

USD/JPY levels

"The USD/JPY pair has reached a daily high of 107.88 for a second consecutive day while holding above the 23.6% retracement of its latest daily advance at 107.55, a sign that bears remain side-lined. In the 4 hours chart, the 20 and 100 SMA converge with the mentioned Fibonacci support, reinforcing the level," Valeria Bednarik, the Chief analyst at FXSteet explained.