USD/JPY: Improved risk sentiments put 111.40 back in focus

  • USD/JPY stretched its previous upside to 110.50 at the start of Asian trading.
  • Trump’s optimistic comments favoring the US-China trade deal and avoiding another government shutdown acted as main catalysts for recent risk-on.
  • Upcoming US CPI and developments on on-going issues can continue highlighting 111.40 resistance for the pair buyers.

The USD/JPY trades little positive around 110.50 during early Asian trading on Tuesday. Latest news from the US showing prospects to avoid second government shutdown and to have a trade deal with China rekindled riskier assets off-late, which in-turn dims the JPY’s safe-haven demand. While recent US reports triggered risk-on, buyers await further developments on the US-China trade deal and the US inflation in order to aim for 111.40 resistance level.

On Tuesday, early-day optimism was built by the US President Donald Trump’s comment that he is ready to have a trade deal with China. Positive vibes were carried forward during the later part of the day when the news broke that the US lawmakers have reached an “agreement in principle” on border security funding that could let the government offices supersede expiry of intermediate funding. Additionally, Mr. Trump said he is ready to extend March 01 deadline to increase tariffs on China if a deal is likely close.

Next in the investors’ radar will be the US President Donald Trump’s meeting to discuss the lawmaker’s proposal on border spending, January month CPI form the US and developments surrounding US-China trade deal.

While Democrats might not have totally agreed to the Trump’s demand, details of the intermediate solution and its acceptance will be key to please the Republican leader and avoid another shutdown. On the other hand, US policymakers will start discussing trade deal with Chinese leaders from February 14 with recent comments from Trump likely offering a good start.

At the data front, the US January month consumer price index (CPI) is likely to recover previous contraction of -0.1% with +0.1% on a monthly basis whereas yearly figure could soften to 1.5% from 1.9% registered during the last-month. Also, the Core CPI figure may remain unchanged at 0.2% on a monthly basis while likely softening to 2.1% from 2.2% YoY.

USD/JPY Technical Analysis

The horizontal-line connecting October lows to late December highs near 111.40 becomes immediate concern for buyers, a break of which 111.70 and 112.00 could appear on their sight.

Meanwhile, 50-day simple moving average (SMA), at 110.35 now, could offer nearby support to the pair whereas 110.00 and 109.50 might please sellers then after.

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