USD/JPY firm in Asia open as Hong Kong election results support risk appetite


  • Hong Kong democrats score a landslide victory, potentially supportive of USD/JPY.
  • USD/JPY pair is technically neutral, trading below the 20 and 200 DMA, both lacking directional strength.

USD/JPY has been a pretty steady open despite a handful of weekend headlines pointing to a less pessimistic outlook for the various geopolitical themes which have kept markets on alert. At the time of writing, USD/JPY is trading at 108.66 within a tight 108.63 and 108.69 range with price hugging the accumulation of the 200, 21 and 50 4-hour moving averages. 

The market's focus, as outlined in this week's Asia open: Recap of latest developments as risk-on tones emerge remains with trade wars and Brexit. The latest news is somewhat more positive for risk appetite, potentially curtailing the yen's advances for the time being with USD/JPY ranging between 108.48 and 108.76 on Friday.

Hong Kong democrats score landslide victory, potentially supportive USD/JPY's upside

One of the standout risks for the day are with the Hong Kong district council elections – However, early results indicated a strong showing for pro-democracy candidates. Reuters reported that "Democratic candidates across the city of 7.4 million secured more than half of the 452 district council seats for the first time, against a strongly resourced and mobilized pro-establishment opposition."

"As of 5:00 a.m. (2100 GMT), pro-democracy candidates had secured a majority with at least 283 seats, compared to about 32 seats for the pro-establishment camp, according to local media estimates. A record 1,104 candidates were vying for 452 seats."

The news should be a relief to markets, (risk-on and USD/JPY positive), considering a positive outcome for the protesters.

US dollar enjoys bullish US economic data

Meanwhile, the US dollar is bid in its own right following dome promising data from Friday. US November flash Markit PMIs contrasted with the European and UK's releases, beating expectations – manufacturing climbed to 51.6 (vs est. 51.0, prior 50.6) and services rose to 52.5 (est. 51.4, prior 51.3).

Looking ahead, for the US calendar, we have Producer Price Index and Consumer Price Index data which analyst at TD Securities said suggest core PCE inflation likely remained steady at 1.7% YoY in October, despite a notable MoM increase in healthcare prices. "On the other hand, headline PCE likely rose a tenth to 1.4% YoY. Separately, we expect personal spending to advance 0.2% MoM for a third consecutive month in October, with a firm increase in services spending leading the upside."

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet, explained that the USD/JPY pair is technically neutral:

"...according to the daily chart, trading below the 20 and 200 DMA, both lacking directional strength, while the 100 DMA also heads nowhere, but well below the current level. Technical indicators are around their midlines, the Momentum heading lower but the RSI stable at around its 50 level. In the shorter term, and according to the 4-hour chart, the pair is also neutral, trading below the 100 SMA but above the 20 SMA, as technical indicators hover around their midlines without directional strength."

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