USD/JPY bears taking control, hunting down a test of 113 the figure

  • USD/JPY dropped to an 11-day low and to test the bull's commitments around 113 the figure as a flight to safety.
  • Concerns on Wall Street due to Trump's  20% corporate tax rate that reportedly that will not come into effect until 2022 and will only be phased in.

Currently, USD/JPY is trading at 113.06, down -0.51% on the day, having posted a daily high at 113.85 and low at 113.03.

US: Personal consumption surged in September while income continued to disappoint  - Wells Fargo

This phase-in news was is not what had been priced into Wall Street and comes as a disappointment, sending stocks lower and the yen higher. Also, Trump/Russia headlines are back in vogue, and while they have previously been a catalyst for just a knee-jerk, the downside in USD/JPY is more vulnerable on this combination, especially when the PCE data did little to support US yields. The idea of the Trump administration looking to slow the path of the Fed raising interest rates or trying to decelerate “quantitative tightening” by selecting Powell is another hindrance of the bulls. 

What are the top-three things affecting 10-yr yields now?

  • A new Fed Chair might tolerate faster growth and faster inflation.
  • The economy is picking up steam. US: Another strong quarter of growth – NAB
  • Prospects for future growth are also improving. Tax reform dominates the market discussion of growth and looks increasingly likely.

However, the US growth story is one that the Bull's can rely on, for the time being, based on last week's GDP data.

Key data releases for the greenback this week:

  • ADP Employment Change
  • ISM Manufacturing
  • FOMC Rate Decision (FOMC: No change in policy is expected - BBH) (Upper Bound) FOMC Rate Decision (Lower Bound) Initial Jobless Claims
  • Change in Nonfarm payrolls Unemployment Rate
  • Average hourly Earnings MoM Average Weekly hours
  • ISM Non-Manufacturing

USD/JPY levels

The pair is bearish, as, in the 4 hours chart, technical indicators are gaining downward traction below their mid-lines while the price is now below its 50 SMA and 113.20 support. The price looks to be headed for a test of the 100 SMA at 112.93 and can target the 200 SMA at 112.55. "The pair would need to regain the 113.80 level to shrug of the negative short-term tone, although gains beyond the 114.00 level seem unlikely for the time being," argued Valeria Bednarik, chief analyst at FXStreet. 

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