- USD/JPY slips to session lows, to a 38.2%Fib retracement of Dec range.
- US data impacting the DXY while US markets brush aside politics, for the time being.
USD/JPY has skidded to fresh lows for the week, printing down at 109.21 having slipped from a high of 109.68, on the day so far. There are little rhyme nor reasons for the holiday period moves at times, other than that there is less liquidity – although today's US data was a disappointment and a likely factor in the downside for the US dollar.
However, it begs the question as to how the S&P 500 was able to pierce the 3200 level for the first time in history today and how the three US benchmarks push on for new session highs. It would appear that the euphoria in US stocks shines-on over the so-called, 'phase-one' deal and that markets have shrugged off the US President's impeachment.
The markets consider that there is virtually no chance the Senate would convict Mr Trump. The Republican majority could even end the trial early without witness testimony. Democrats and Republicans must now agree how the Senate trial will be held. Meanwhile, Democratic House Speaker Nancy Pelosi has suggested the House could delay sending the articles of impeachment to the Senate and that could put off the trial for an indefinite period, denying Mr Trump his expected acquittal.
US data disappointing into year-end ahead of NFP
One factor that seemed to have contributed to a bleed out in USD/JPY at the start of the day came from the Philly Fed December data miss which arrived at just 0.3% vs 8.0% expected and the prior +10.4%. The US stock markets may no longer be the best guide for FX considering how inflated they are on money that is de-coupled from economic drivers. Elsewhere, US initial jobless claims were at 234k vs 225k estimates which is an additional bearish factor for the US dollar considering how close we are now to the December Nonfarm Payrolls which will be released in a couple of week's time.
DXY in broader upside correction
All-in, however, the US dollar is, in fact, making a broader recovery than today's price action is challenging.
The DXY has been in recovery from low 96.60s until today's highs of 97.49 which puts the moves in USD/JPY into context. The US dollar is holding above the 21-hour moving average in the DXY and is supported by the 50-hour moving average and a confluence of the 38.2% Fibonacci of the December range which reinforces the upside bias on a technical basis and a seasonal basis when considering the end of year repatriation flows into the US dollar – there are still plenty of trading days left for the year.
Yen could lead the way in 2020
However, one could argue that the US political cycle has been turning less supportive for risk sentiment through 2020 and noting the recent turn of sentiment in Brexit, there are risks rising again, especially given an underwhelming follow through to a phase one deal – it could be that the yen leads the stocks lower next time around.
USD/JPY levels
On the downside, there is support seen between the 200 and 55-day moving averages and the current December low at 108.76/43. "Only unexpected failure at 107.89 would probably trigger losses to the 106.48 October low. Failure at 106.48 would target the 106.00 mark," analysts a Commerzbank argued.
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