USD/JPY: Bulls take up fresh six-week highs

USD/JPY has preserved the day’s gains in Tokyo which took the pair to another six-week high above the 108 handle to 108.05. Overnight, stocks advanced with the DJIA notching its sixth-straight gain, while the S&P 500 closed firmly higher for the fifth time in six sessions while the Nasdaq broke up out of its three-day losing streak. 

While we await the US Consumer Price Index, the Europan Central Bank is on the cards at the same time which should make for a volatile session tonight over both of the events.  While the Federal Reserve, who will announce its interest rate decision next week, prefers the PCE deflator,  CPI still moves markets at times US August CPI is seen higher by 0.1% month, 1.8% year overall.

President Trump returns to his twitter and moves markets

Trump has been relatively quiet of late and there has not been much action from him over Twitter of late. However, today, Trump took to his post once again, attacking the Fed and said, "With the FOMC meeting a week away, President Trump tweeted, “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt.” He declared Fed chair Powell to be naïve and called the Fed “Boneheads.” 

Trump also spoke-up about China, boosting sentiment, saying that Beijing wants to make a trade deal and announced a range of US. goods to be exempted from the 25% extra tariffs put in place last year, seeking to ease the impact from the trade war. 

As for US yields, the 2-year treasury yields ranged sideways between 1.65% and 1.68% while the 10's yield ranged between 1.71% and 1.75% (a one-month high). "Markets are pricing 25bp of easing at the 19 September Fed meeting, and a terminal rate of 1.09% (Fed funds rate currently 2.13%)," analysts at Westpac explained.  As for data, the US PPI inflation climbed 0.1% in August, while the core rate rose 0.3%  - 1.8% and 2.3% YoY. 

USD/JPY levels

The USD/JPY pair is consolidating above a major Fibonacci level, the 61.8% retracement of the August decline.  It retains its bullish potential, as, in the 4 hours chart, the pair continues developing above all of its moving averages, and with the 20 SMA extending its bullish slope above the larger ones. Technical indicators in the mentioned chart lack directional strength, but hold on to weekly highs, with the RSI in overbought levels. Further advances are likely once above 108.05,  while bulls are now expected to defend the downside around the mentioned Fibonacci support at 107.45.