USD/JPY renews 2019-high, inches closer to 111

  • Wall Street posts gains on Wednesday boosted by energy and financials.
  • 10-year US T-bond yield rises for the third straight day.
  • US Dollar Index clings to daily gains near 97.

Despite the broad-based USD weakness on Tuesday, the USD/JPY was able to close the day modestly higher and preserve its bullish momentum on Wednesday supported by the risk-on mood. As of writing, the pair was trading at its highest level of 2019 at 110.88, adding 0.36% on a daily basis.

Hopes of President Trump pushing the March 1 deadline to reach a trade deal with China allowed Wall Street to start the day in the green and made it tough for safe-haven Treasury Bonds to find demand, lifting their yields higher. After rising on Monday and Tuesday, the 10-year T-bond yield continued to push higher and gained more than 1% to help the buck reverse yesterday's losses. At the moment, the DXY is up 0.3% on the day near 97.

Earlier in the day, the U.S. Bureau of Labor Statistics reported that the CPI in January stayed unchanged in January for the second month in a row and brought the annual rate down to 1.6% from 1.9% recorded in December. Nevertheless, this reading came in above the analysts' estimate of 1.5% and didn't have a negative impact on the USD. 

On Thursday, growth data from Japan will be looked upon for fresh impetus. Markets expected the real GDP to expand by 0.4% on a quarterly basis in Q4 following the third quarter's 0.6% contraction.

Technical levels to watch for

The pair could face the initial resistance at 111 (psychological level) ahead of 111.50 (200-DMA) and 112.35 (Oct. 16, 2018, high). On the downside, supports are located at 110.50 (daily low), 110 (psychological level) and 109.70 (20-DMA).

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