USD/JPY cracks the 111 handle and bulls eye 111.41

  • USD/JPY rose from 110.60 to nearly 111 in late NY trade, printing highs since 28 December, and has just pierced the figure scoring a high of 111.08 so far.
  • Dollar and US yields elevated on solid US CPI while Japanese GDP came in below expectations. 

Japanese GDP Q4 preliminary data arrived at 0.3% Q/Q vs expected 0.4%, although was largely ignored as markets concentrate on sentiment around geopolitics and US economic performance. 

US headline consumer prices were unchanged in January, below expectations for a 0.1% gain. "Encouragingly, core inflation rose 0.2% m/m, a little above expectations, to nudge up from 2.1% to 2.2% y/y. Nonetheless, US inflation data remains contained and consistent with recent forward guidance that tightening is on hold for the time being. Echoing this sentiment, US Fed’s Bostic said “we can take our time” to get to neutral," analysts at ANZ Bank explained. 

Arguing that today's CPI data was soft, we had Philly Fed president Harker cross the wires as well who argues for one and done rate hike this year and another in 2020. The dollar was firmer on the 97 handle, rising to 97.26 and the US 10yr treasury yield rose from 2.68% to 2.71%, while 2yr yields rose from 2.51% to 2.54%.  

Elsewhere, US stocks extended the week's gains, mildly firmer due to the optimism over trade talks that got underway this week between low-level officials, soon to be joined by trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin who will arrive in Beijing today to meet with Chinese Vice Premier Liu He, who is the top economic adviser to President Xi Jinping.

Moreover, Trump, who declared that trade talks are going very well, was also reported earlier in the week to be willing to delay the March 1 deadline that he previously proposed for raising tariffs if negotiations with Beijing progress positively. 

Lastly, U.S. equities risk appetite was underpinned by investors who have cheered Trump's comments over a government shutdown, saying that it would be a “terrible thing”, leading to speculation that one would be averted.

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet, notes that the pair is poised to extend its advance according to technical readings in the 4 hours chart:

"It kept advancing above its 100 and 200 SMA, with the shortest accelerating north, as technical indicatorscontinue to lack directional strength but at weekly highs."

"The RSI indicator in fact, consolidates at around 76, with no signs of upward exhaustion. The 111.00 figure is the first resistance en route to 111.41, December 26 high, and where the pair also has its 100 DMA. The level will likely attract some selling interest if it's reached."

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