Has USDJPY Hit Bottom?

Market Drivers for November 30, 2017

  • Dollar extends rally
  • Cable holds bid
  • Nikkei 0.57% DAX 0.56%
  • Oil $57/bbl
  • Gold $1281/oz.
  • Bitcoin $10,250

Europe and Asia EUR: GE Unemployment -18K vs. -10K EUR: CPI

North America USD: PI/PS 8:30 USD: Chicago PMI 10:00

The dollar was better bid in Asian and early European trade today boosted by news that the GOP tax reform bill cleared yet another hurdle before going to full debate and floor vote.

USDJPY rose to within a few pips of the 112.50 level before hitting some mild profit taking but remained well supported in early London trade as sentiment towards the buck has improved markedly. The pair appears to have carved out a near-term bottom at the 111.00 level and could stage further rally if US data proves supportive later today.

Meanwhile, EURUSD sentiment weakened noticeably as the night progressed with the pair dipping to 1.1810 after EZ CPI data printed cooler than expected. EZ CPI came in at 1.5% versus 1.6% – well below the ECB’s 2% target as the region shows no signs of any pick up in price pressures. This dynamic allows the ECB to maintain its QE program for time being and shows that persistent deflation is a problem on both sides of the Atlantic preventing central banks from normalizing policy for now.

In contrast to the euro, cable maintained its winning ways rallying to within 20 pips of the 1.3500 figure as progress on Brexit talks continues to push the pair higher. A move through the 1.3500 level would open a run towards post-Brexit vote highs of 1.3600 as traders get more enthusiastic about the idea of a workable compromise.

In North America, the calendar is quiet once again, but Personal Income/Spending data could have an impact on USDJPY. The market is looking for Real Personal Consumption to decline to 0.2% from 0.6% the month prior, so any upward surprise could send USDJPY through the 112.50 level and towards 113.00 figure as dollar recovery continues.

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