USD/JPY reaches for higher grounds, highest since May 2019 testing a key 38.2% Fibo
|- USD/JPY is making tracks to the upside, printing the highest levels since May of this year.
- Risk-on sentiment and solid US data accompanied by an upbeat assessment in the Beige Book ignites the pair.
USD/JPY has rallied in the latter part of the North American session ahead of the Thanksgiving holidays and end-of-month. End of month flows could well be attributed to the bid as fund-managers square up ahead of the close on Wall Street. US stocks and the US bond market will be closed on Thursday in observance of Thanksgiving. On Friday, the New York Stock Exchange and the Nasdaq will resume normal trading hours but will close early at 1 p.m. ET.
Meanwhile, a risk-on tone has been maintained on the back of decent US data releases as well as continued positive sentiment over US/Sino trade relations. Markets are in anticipation of end to around 17 months of tit-for-tat trade tariff wars between the two largest economic global powers with a so-called "phase-one" trade deal in sight. President Donald Trump said that they were in the final throes of securing a deal. This was coupled with the news that US trade negotiators have been invited to Beijing for an in-person talk after top negotiators from the two countries spoke by telephone and agreed to keep working on remaining issues.
US markets solid into the close on stronger US data
Ahead of the close on Wall Street, US stocks were higher with the S&P 500 adding 0.42% and the Dow Jones +0.17%. European benchmarks were ending higher also, with the DAX rose 0.4% and the FTSE 100 was up 0.4%. At the time of writing, the yield on the US 10-year note was higher by 1.28% with the Yen continuing its slide as the market remained in a risk-on setting into the closing hour.
As for US data, activity releases were generally stronger than expected, allaying fears that the US is in the final stages of its business expansion. "The upward revision to Q3 GDP, robust personal spending, and rise in October core durable goods orders imply momentum in activity at the start of Q4 is better than the manufacturing data have signalled. Initial claims data were also better than expected; signalling ongoing labour market gains, while below-target inflation confirms that monetary policy overtightening will not choke this expansion," analysts at ANZBank explained, adding:
US Q3 GDP was revised up to 2.1% from 1.9%, helped by a small upward revision to private consumption (2.9% from 2.8%). Exports, federal spending, and private inventories also boosted GDP in Q3. Overall, the GDP data implied little need for the Federal Reserve to ease further. The PCE inflation data were a touch weaker than expected at 1.3% y/y headline and 1.6% y/y core. The Fed's preferred measure of headline inflation has been below target (2.0%) for 12 consecutive months.
USD/JPY levels
Bulls have broken above the 200-Day moving average and have pierced the 38.2% Fibonacci retracement level of the summer 20185 highs to summer 2016 lows range. 109.70 comes as prior support (March 2019) and bulls will seek out the 2015-2019 downtrend at 110.66 should the psychological 110 barrier give out. Further up, if respecting the daily inverted Head & Shoulders rules, then 115 is the wide measured target for the bulls to shoot for.
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