USD/JPY: Rallies beyond 111.00 ahead of Japan GDP

  • USD/JPY crossed 111.00 to flash the fresh 2019 high on early Thursday.
  • Improvements in market risk sentiment on positives for the US-China trade deal and the US government dragged the safe-haven Japanese Yen (JPY) downwards.
  • Trades now await fourth quarter GDP details from Japan for fresh impulse.

The USD/JPY pair marks fresh high of 2019 by extending yesterday's break of 111.00 at the start of Asian trading on Thursday. The pair recently recovered on improved risk sentiment across the board as positive developments on the US-China trade deal and likely avoidance of the US government shutdown played their role. Investors may now look for third quarter GDP details from Japan in order to determine near-term trades while political plays surrounding the trade deal and the US government shutdown can continue offering background noise.

The US President Donald Trump has been on a run up to provide positive comments off-late. Recently, he turned optimistic about having a trade-deal with China and is also ready to see what opposition offers to keep the government running in exchange for full funding for border wall surrounding Mexico. Fox News reported that the White House communicates Trump’s travel to China in March and the President is weighing possibilities regarding the deadline of China trade deal, i.e. March 01 as of now.

Not only optimism concerning the US politics but economic calendar also refrained from dismantling market risk-on. The January month US consumer price index (CPI) MoM slipped to 0.0% against 0.1% forecast and -0.1% whereas the inflation rate bear forecast of 1.5% by rising to 1.6% on a yearly basis. The Core CPI remained unchanged at 0.2% and 2.2% on a monthly and yearly basis respectively.

Moving on, a preliminary reading of fourth quarter (Q4) Japan GDP is next up in the JPY traders’ radar. GDP growth is expected to rise from -0.6% contraction marked in the previous quarter to +0.4% on Q/Q while registering an increase to +1.4% from -2.5% if observing the same quarter of 2017.

While a likely increase in GDP may trigger the USD/JPY pullback, overall sentiment remains favorable to the upside considering positive developments at the US-China trade deal and the US government shutdown.

USD/JPY Technical Analysis

Break of 111.00 opens the gate for the USD/JPY pair’s extended rally to 200-day simple moving average (SMA) level of 111.30 and then to the late-December highs around 111.40. However, 111.80 and 112.25 may challenge the buyers then after.

On the downside, 110.65, 110.30 and 110.00 are likely immediate supports to watch during the pair’s nearby decline whereas 109.80 and 109.50 can guard the south-run afterward.

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