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USD/JPY stationary heading into 2019, but Chinese PMIs could offer...something...

  • USD/JPY is trading at 110.34 and in a standstill ahead of the Chinese PMIs, which if ignored, will likely leave the yen perched on the bid for the end of 2018. 
  • USD/JPY has been broadly offered due to risk-off sentiment as we head into 2019. 

USD/JPY has dropped from the early Dec highs on the 114 handle and has been sliding as stock markets put on a show into year end. Investors are looking for safer havens in the main, although there has been quite a turnaround, in price action at least, in the last few sessions during illiquid holidays allowing for wild moves.

Stocks have been a roller-coaster

  • What's been happening over the holiday period and what can we expect for the first week of the New Year?

As explained previously in, What's been happening over the holiday period and what can we expect for the first week of the New Year?, the Dow's best daily performance came on 26th: "Traders pounced on beaten-down stock prices that came from a brutal sell-off on a shortened Christmas Eve. Both the Dow and S&P added 5% on the 26th and the NASDAQ 5.6% - Those were the best gains since 2009,  just after suffering the worst decline in history in the trading session before Christmas." This sent USD/JPY higher, by only by a fraction in percentage and relative terms to the US stock markets leaving a bearish outlook on the charts still. At the same time, however, the U.S. rate complex is sinking as investors out price the Fed. the 2- and 10-year US Treasury yields hit a new low and hover near recent lows, adding weight long yen.

  • China and International Trade in 2019: The crossroads of a great power

Markets now await the Chinese PMIs which may have some impact considering how investors are positioned for a Chinese slow down which investors fear could set the stage for 2019 and weigh on the broader global economic recovery. Elsewhere, Sino/US trade relations will be under the microscope as a mid-level US delegation is reportedly going to be heading to China in the week of January 7th to initiate the next round of trade talks. 

USD/JPY levels

  • Support levels: 110.15 109.80 109.45
  • Resistance levels: 110.75 111.05 111.40

Valeria Bednarik, Chief Analyst at FXStreet explained that the short-term picture for the pair is bearish, as it's developing comfortable below the 38.2% retracement of the March/October rally at 110.75, the immediate resistance:

"In the 4 hours chart, the 100 and 200 SMA gain downward strength far above the current level, while technical indicators maintain downward slopes, the Momentum within neutral levels but the RSI currently at 37, anticipating additional declines ahead."

 

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