USD/JPY: at yearly highs and bullish

USD/JPY Current price: 110.53

  • Japanese data points to a steeper economic slowdown at the beginning of 2019.
  • Rallying equities underpin the USD/JPY, adding to broad dollar's strength.

The USD/JPY pair peaked at 110.65 during the Asian session, still lead by broad dollar's demand. Risk-positive news helped the pair advance, although the BOJ offered to buy ¥180B of 10- to 25-year JGBs, down from ¥200B last week. Such a movement usually triggers speculation that the central bank may be considering reducing its stimulus although Governor Kuroda has repeated multiple times that is part of its current policy aimed to maintain the yield curve under control.

Equities were sharply up in Asia, while European indexes follow suit, following headlines that the US Congress has reached an agreement in principle, aimed to avoid another government shutdown. US President Trump signed a bill to fund the government for three weeks, which will end this Friday. Now, Trump must approve whatever deal lawmakers made, to keep the ball rolling. No detail on the agreement has been released and is yet to be seen what they've decided about the border wall.

Japanese data released at the beginning of the day weighed on the yen, as the January preliminary estimate of January Machine Tool Orders fell by 18.8% YoY, following 18.3% decline in December, while the monthly Tertiary Industry Index was down by 0.3%. There are no relevant macroeconomic news scheduled in the US today, although Fed's head Powell is scheduled to deliver r a speech titled "Economic Development in High Poverty Rural Communities" at the Hope Enterprise Corporation Rural Policy Forum, in Mississippi.

 The pair retains its gains, trading a few pips below its daily high, and with room to extend its advance, despite technical indicators in the 4 hours chart stand in overbought territory, a mere consequence of the previous range. In the mentioned chart, the pair is also above its moving averages, with the 100 SMA advancing above the 200 SMA, leaning the scale to the upside, while technical indicators lose upward strength, holding in overbought levels. The pair has an immediate support around 110.45, and the upward potential will prevail as long as above the level.

 Support levels: 110.45 110.10 109.85        

Resistance levels: 110.65 111.00 111.45

View Live Chart for the USD/JPY

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