USD/JPY has broken a key resistance area and it looks like the momentum has a valid catalyst behind it. Is it time to jump in?
Fresh Market Headlines & Economic Data:
- NZIER’s Quarterly Survey of Business Opinion shows pick-up in business confidence
- Stats NZ reports new dwelling units at a 45-year high
- U.S. Treasury removes designation of China as currency manipulator
- Japan’s bank lending up by 1.8% in December, lower than November’s 2.1% growth
- Japan current account surplus rises 75% on falling energy prices
- China December trade beats forecasts: exports up 7.6%, imports up 16.3%
- China’s USD-denominated export growth lost steam in 2019 amid US trade war
- USTR Lighthizer says nearly done with translation of China trade deal
- Politico: China to buy more U.S. energy, manufactured goods in trade deal
Upcoming Potential Catalysts on the Forex Calendar:
- U.S. NFIB small business optimism data due at 11:00 am GMT
- U.S. CPI report at 1:30 pm GMT
- FOMC’s John Williams to talk financial services in London at 2:00 pm GMT
- FOMC’s Esther George to give a speech in Kansas at 6:00 pm GMT
What to Watch: USD/JPY
Last Friday we talked about USD/JPY being close to a psychologically significant resistance level. A few hours ago the pair has breached the 109.70 area and is currently a few pips away from the 110.00 handle.
It seems like last Friday’s disappointing NFP numbers did little to curb USD/JPY’s upside momentum. In fact, anticipation of the signing of “phase one” of the U.S.-China trade deal as well as easing tensions between the U.S. and Iran have strengthened the bulls’ reserve.
MarketMilk’s trend indicators are currently in favor of the bulls as ALL moving averages suggest a “bullish” trend on the daily time frame. 110.65, 110.90, and 112.00 are good targets if you’re looking to trade the pair this week.
Before you buy USD/JPY like there’s no tomorrow, however, you should note that USD/JPY has already moved by its 30-day volatility. That means you’ll need at least another catalyst if you want to see strong moves in the next trading sessions.
Meanwhile, dollar bears can wait for a possible bearish reaction to the big 110.00. The 109.70 handle is a good short-term target if you’re thinking of trading the 110.00 test. If USD/JPY ends up falling below the previous resistance, then you might want to look at 108.50 and 108.00 as potential profit targets.