• USD/JPY is showing resilience to upbeat Japanese household spending data.
  • Markets likely expect household spending to drop over the coming months.
  • Bids for JPY remain elusive amid the rally in risky assets and Nikkei's rise to one-year highs.

USD/JPY is flashing green in Asia, despite an upbeat Japanese data and amid the risk-on in the equity markets.

The currency pair has added close to 15 pips in the last few minutes and is currently trading at 109.35, having hit a high of 109.49 in the overnight trade.

Japan's Household Spending jumped 9.5% year-on-year in September, beating the expected rise of 7.8% by a big margin and up significantly from the preceding month's 1% rise. Labor Cash Earnings also rose 0.8% in annualized terms, bettering the 0.4% estimate.

The Yen, however, is not impressed, possibly due to fears that consumers spent more ahead of the October tax hike and may tighten their purse strings going forward. Notably, spending had spiked 7.2% in March 2014, a month ahead of the previous sales tax increase, only to fall sharply and stay negative more than a year, as per Reuters.

Traders, therefore, are right in being reluctant to bid for JPY – more so, as risky assets are flashing green. Japan's Nikkei index is currently trading at 23,550, the highest level since Oct. 10, 2018. The S&P 500 futures are also reporting a 0.11% gain, possibly on the US-China trade optimism. A White House spokesman told Fox News a few minutes before press time that the White House is very optimistic that a trade deal with China would be reached soon.

Looking forward, the pair may continue to track the action in the major equity markets and US treasury yields. The 10-year yield rose to 1.97% in the overnight trade to clock three-month highs. China's trade data could also influence demand for the anti-risk JPY.

Technical levels

In his remarks prepared for delivery at an event organized by the Money Marketeers of New York University, Atlanta Federal Reserve Bank (Fed) President Raphael Bostic said that the current monetary policy is "accommodative."

Additional Quotes:

Further adjustments will depend on data.

The economy may be a bit beyond full employment.

Comfortable 'standing pat' with policy to weigh economic data over the coming months.

Expects economic data released before the end of the quarter will boost GDP growth.

Meanwhile, the US dollar index treads water around 98.15 region but remains close to the three-week highs 98.23. The greenback rallied on Thursday in sync with the Treasury yields, as the risk-on sentiment emerged as the main theme amid increased US-China trade deal expectations.

  • GBP/USD is looking south with the hourly chart flashing lower highs, bear MA cross.
  • GBP needs to defend the support at 1.2788 to avoid deeper losses.

GBP/USD is flashing green at press time, but the bias remains bearish with lower highs setup intact on the hourly chart.

The pair is currently trading at 1.2822, having added more than 10 pips in the last few minutes.

The outlook as per the hourly chart would turn bullish if the falling trendline resistance at 1.2862 is violated. That, however, looks unlikely, as the US treasury yields are rising. Notably, the 10-year yield has risen from 1.80% to 1.97% – the highest level since Aug. 1.

Also, the 50-hour moving average has crossed below the 200-hour average to indicate the path of least resistance is to the downside.

The pair, therefore, looks set to test key support at 1.2788 (Oct. 24 low). A violation there would establish a lower high, lower low setup on the daily chart and yield a deeper drop to 1.2579 (July 12 low).

Hourly chart

Trend: Bearish

Technical levels