The weakening of the US dollar and the renewed global trade and geopolitical tensions were catalysts for the USD/JPY pair to correct lower towards the 108.62 support, its lowest in more than two weeks. And with investor’s averse risk to safe havens, the most important of which is the Japanese yen. The headlines in the beginning of this week's transactions were dominated by reports of a US missile attack on an Iranian-backed armed groups in Iraq and Syria. US Secretary of State Mike Bombo told reporters that such strikes may be justified, so the recent move in the currency, stock and bond markets could be driven by the prospect of new tensions between the United States and Iran in the Gulf.
On the last trading day of 2019, China National Bureau of Statistics (NBS) announced that China's Industrial Purchasing Managers Index (PMI) reached a reading of 50.2 in December, unchanged from November. A reading above the 50 level indicates growth, while the reading below reflects contraction. This was the second consecutive month of growth, partly supported by increased supply and demand in addition to increased export orders. Chinese imports and exports are improving in December, with the sub-index of new export orders increasing by 1.5 points to 50.3, its first growth since June 2018. The import sub-index rose 0.1 points per month, on a monthly basis, to 49.9.
The dollar fell near its July lows in a risky currency favorable market, as supply shortages due to Christmas and New Year holidays coupled with new optimism among investors about the future of US-China trade relations seem to have dampened traders’ turnout on the American currency as a safe haven.
The dollar DXY index losses were driven largely by strong gains for the Euro, the British pound, and the Japanese yen, which together account for about 82% of the flows measured by the index, which is designed to track the performance of the greenback relative to the most traded currencies. The losses were mildly offset by dollar gains against the Swedish krona and the Canadian dollar.
According to the technical analysis of the pair: As we expected before, we now confirm that the USD/JPY breaking to 109.00 will motivate the bears to move the pair to lower levels, which is what happened now from the current level of 108.60. The pair enters into good buying areas. The same applies if it falls to 108.10 levels and 107.65, respectively. On the upside, there will be no strength for the upward trend without moving towards 110.00 psychological resistance. Renewed trade and political tensions around the world will continue to spur further gains for the Japanese yen.
After the Chinese data will be released, the focus will be on announcing the US Consumer Confidence Index data. Japanese markets will be on vacation until January 7, 2020.
