USD/JPY ticks back up within a narrow range as stocks reach new session highs

  • The USD/JPY is moving back up within very narrow trading ranges.
  • The pair is tracking the stock markets, albeit at a cautious pace.
  • The broader technical picture is slightly bearish

The USD/JPY is trading just above 108.70, balanced on the day. The pair recovered from session lows of 108.44 in a very limited trading range. The peak for the day has been 108.88. 

The US stock markets are rising once again. A turbulent day on Friday saw the USD/JPY at a new 5-month low near 108 before share prices rebounded. Markets remain volatile in the wake of the new week but remain in positive territory. Stocks began the day on the rise, pared their gains and then reemerged and reached new highs.

With no significant economic news on the agenda, the sentiment is dominant. President Trump is announcing an infrastructure plan worth $200 billion spread over ten years, but this is not moving the markets.

The White House published new forecasts, pointing to 3% growth in 2018, 3.2% in 2019 and 3.1% in 2020. All are upgrades to previous assessments which were below 3%. The unemployment rate is projected to drop below 4% and inflation to be around 2%. They foresee 10-year Treasury notes to average 2.6% in 2018. Markets focus more on forecasts published by the Federal Reserve. 

The big event of the week is the US inflation report that will be released on Wednesday at 13:30 GMT. See the preview here.

USD/JPY daily chart leans lower

The USD/JPY daily chart shows a clear trend to the downside. The pair is posting lower highs and lower lows since it peaked in late October. The RSI remains below 50 but not in oversold territory. The 50-day SMA has recently crossed below the 200-day SMA. All these indicators point to further downside. 

Support awaits for the pair at 108.05, the swing low on Friday. Further below, the 107.10 level that was the trough in September is a crucial level. On the upside, 109.70 capped the pair last week and is the last barrier before 110. Further above, 110.50 was a peak beforehand. 

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