Despite the US markets holiday, USD/JPY has maintained its bullish stability around the 108.52 resistance level awaiting stronger catalysts to complete the correction higher. The recent truce in the US-China tariff war has increased investors' appetite for risk and the abandonment of safe havens, notably the Japanese Yen. The disappointing results of US inflation indicators helped the US dollar lose much of its gains as it supported expectations that the Fed will cut US interest rates this month for the third time in 2019.
The US dollar index, which measures the greenback's performance against a basket of six rival currencies, was down 0.5% last week after a 0.3% loss the previous week, and the dollar index has seen a strong drop (38.2%) since the strong rally at the end of June, falling near the 98.85 level. Technical indicators are moving downwards, but 97.75-98.10 range could provide tremendous support. The dollar has risen against the Yen in five of the past six sessions and has crossed the double top seen between late September and early this month near 108.50 Yen.
The United States will not go ahead with tariff increases on about $ 250 billion of Chinese goods from 25% to 30%, and China will buy more US agricultural products. Trump and Xi will meet on the sidelines of the APEC meeting next month. But tariffs set at mid-December for about $ 160 billion of Chinese goods remain.
China's imports and exports were weaker than August and less than expected. The trade surplus widened to $ 39.65 billion in September from $ 34.78 billion. Exports fell 3.2% year-on-year after falling 1.0% in August and against forecasts of a 2.8% decline. Total imports fell 8.5% in September after a 5.6% decline in August. The surplus with the United States (about $ 26 billion) represents about two-thirds of China's surplus. Exports to the US fell by more than a fifth (22%) compared to last year, and imports from the United States fell by 16%. China also reported that car sales fell 6.6% year-on-year in September, the 15th decline in the past 16 months.
According to the technical analysis of the pair: The USD / JPY breaking above 108.50 resistance will remain supportive of the upward correction and will strengthen the new trend if the pair succeeded in moving towards the 110.00 psychological resistance. Should the bears be able to take the pair to the support levels of 107.70 and 106.90, the hopes of the current bullish correction will collapse and the bearish trend will be stronger as it is confirmed in the long term.
As for today's economic data, The JPY will react to the comments of the Governor of the Bank of Japan, industrial production figures as well as Chinese inflation figures. From the United States, the Empire State Industrial Index will be released.
