USD/JPY: Bulls in charge as risk appetite returns

USD/JPY is up +0.09% in Tokyo, steady on the open while risk-appetite dictates the trajectory again, with a more optimistic view over the trade wars following a series of positive headlines coming out of both the US and China and subsequent media channels. USD/JPY is currently trading at 106,42, just off the highs of 106.54 and testing the August resistance area. 

Risk appetite returned overnight and the Dow Jones Industrial Average added 326.15 points, or 1.3%, to end at 26,362.25, while the S&P 500 index SPX, climbed 36.64 points, or 1.3%, to finish at 2,924.58 after China said it wouldn’t immediately retaliate against the latest U.S. tariffs increases. 

US data

Elsewhere, US data came with the Quarterly second GDP growth reading that was revised fractionally lower to 2.0% from 2.1%. This was led by less government spending than initially estimated and a bigger decline in residential investment.

"Personal spending was revised up to show an even punchier 4.7% annualised pace (vs 4.3% first estimate), highlighting the consumer’s role as the key pillar of US growth. US pending home sales fell 2.5% in July, a larger than expected decline. Still, pending home sales are 7% above their low point in late 2018, lower mortgage rates and a healthy jobs market providing a sound backdrop for the housing industry," analysts at Westpac explained. Subsequently, US 2-year treasury yields rose from 1.49% to 1.54%, the 10-year yield climbed from 1.44% to 1.53%. 

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet explained that the USD/JPY pair the pair is above the 20 and 100 SMA on a 4-hour basis, while below the 200 simple moving average, now at around 107.00.

"Technical indicators hold on to daily highs decelerating their advances rather in line with decreased volumes that indicating upside exhaustion. The pair could resume its decline on a break below 106.40, while the short-term rally will likely continue once above 107.00."