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USD/JPY advances above 111.30 boosted by risk appetite

  • Dow posts record daily gain with over 1000 points.
  • 10-year T-bond yield rises more than 2%.
  • US Dollar Index climbs above 97.

The USD/JPY pair extended its daily rally and rose above the 111.30 mark as the upbeat market mood weighed on safe-havens such as the JPY. As of writing, the pair was trading at 111.33, adding 0.95% on a daily basis.

With investors returning from the Christmas holiday, major equity indexes started the day on a positive note to reflect a higher appetite for risky assets. The Dow Jones Industrial Average added more than 1000 points, or nearly 5%, on the day to post its largest daily percentage rise ever. Similarly, the S&P 500 closed the day 4.96% higher and the Nasdaq Composite gained 6.15%. 

Additionally, the U.S. Treasury bonds struggled to find demand in the risk-on environment and their yields surged on the day to provide a boost to the greenback. The 10-year reference and the 5-year reference both rose more than 2% and the US Dollar Index recovered above the 97 mark after testing the 96.50 handle earlier in the week. At the moment, the DXY is up 0.5% on the day at 97.05.

Commenting on today's market action, "Either equities are reassured that President Trump is not going to do something he can't (fire the Fed Chairman), or that rates are relatively low, or that a 3% US economy might not warrant a bear market, or that Santa had a good season. At any rate-- Stocks are higher," said FXStreet senior analyst Joseph Trevisani.

Technical levels to consider

The immediate resistance for the pair could be seen at 111.60 (200-DMA) ahead of 112 (psychological level) and 112.30 (20-DMA). On the downside, supports align at 110.30 (daily low), 110 (psychological level) and 109.40 (Jun. 25 low).

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