USD/JPY consolidates gains to 109.00, trade sentiment stays positive

• USD/JPY steps back from one week high amid a lack of major catalysts.
• Trade headlines keep safe-havens under pressure, USD remains broadly stronger.
• Fed Chair Powell’s speech is in the market’s immediate focus.

USD/JPY witnesses a mild pullback from the one week top while flashing 108.90 as a quote on early Tuesday morning in Asia.

The safe-haven current pair surged to the highest in a week on Monday as headlines concerning the phase one trade deal between the United States (US) and China portrayed market’s rush to riskier assets. Be it the US President Donald Trump or China’s likely support to copyrights, not to forget Global Times and South China Morning Post (SCMP), all corners were cozy enough to signal that the world’s top two superpowers are on the verge of signing an initial trade agreement.

On the data front, Chicago Fed National Activity Index and Dallas Fed Manufacturing Index flashed mixed readings. Though, none of them could stop the US dollar (USD) from being the leader of the day. While the activity gauge from the Chicago Federal Reserve (Fed) slumped below -0.43 forecast to -0.71, the lowest since April, the Dallas Fed number rose beyond -11.3 expectations to -1.3.

In a reaction to the overall risk-on, Wall Street’s major benchmarks registered fresh record highs whereas S&P 500 Futures gain 0.64% by the press time but the US 10-year treasury yields slip two basis points to 1.75%.

The Fed Chairman Jerome Powell is up for a speech titled "Building on the Gains from the Long Expansion" at the Providence Chamber of Commerce Annual Meeting in Rhode Island. The same will be closely observed to confirm that the latest swing in data as temporary. “With some early Q4 data disappointing, the question for the Fed is whether this dip is temporary or something more permanent. The baseline expectation is that it is temporary,” says the Australia and New Zealand Banking Group (ANZ).

Additionally, trade headlines and second-tier housing, manufacturing data from the US, together with Consumer Confidence, will be the key to watch afterward. Also on the list is the speech from the Federal Reserve Governor Lael Brainard.

Technical Analysis

Unless closing beyond the 200-day Simple Moving Average (SMA) level of 109.00, the USD/JPY pair is less likely to revisit monthly top nearing 109.50. As a result, mid-month low close to 108.20 and the monthly bottom around 107.90 will keep flashing on seller’s radar.