USD/JPY fell to the 108.92 support with a stronger decline in the US ISM Manufacturing PMI, and investors' risk appetite ceased with the absence of any details of the upcoming trade agreement between the US and China. The pair is stable around 109.16 at the time of writing. Its recent gains hit 109.72 resistance. The Fed often asserts companies and investors that "the US economy is in good shape" and that the mid-decade correction is complete.
But markets are less optimistic. The US economy appears to be slowing further in the fourth quarter. Several cyclical indicators, such as the 12-month moving average of employment and car sales, have peaked a few years ago. The leading economic indicator fell for three consecutive months in October, which marked a looming recession. The return of the yield curve rather than its reversal seems to be related to the economic downturn, according to some recent studies. Economic risks are biased to the downside. Many investors await the reaction from accountability measures, the trade war, and the global economic slowdown, and are attracted to positive returns in the US, and continue to support the US dollar and assets.
On the Japanese side. The sales tax hike on October 1, coupled with the impact of the hurricane, has negatively affected the country's economic activity, especially on the consumption side. This means a weak start to the fourth quarter of 2019. Consequently, the Bank of Japan began to pressure its bond purchases, at least partially, to help the sharp yield curve, and with the stock market heading higher, it also saw less need to buy ETFs. Japanese Prime Minister Abe has called for an additional budget of 5 trillion yen, but the start of a weaker-than-expected fourth quarter could boost that size. Therefore, the JPY may remain more sensitive to global developments, especially investors' risk appetite.
According to the technical analysis of the pair: Stability of USD/JPY above the 109.00 level will continue to maintain the upward direction, and we are still waiting for the test of 110.00 psychological resistance, and the stability above it to confirm the strength of the trend. On the downside, the 108.00 support remains the key to the downside strength again. Taking into account that the developments of the “Phase 1” trade agreement between the United States and China have the most impact on the movements of the pair in the coming period, especially with the imminent date of imposing more US tariffs on China's imports.
As for the economic calendar data today: The economic calendar has no significant and influential data from either Japan or the United States.