USD/JPY: Committed bulls target 110.16 recent highs

• USD/JPY has started out the week on the front foot, moving in on the 109.90s yet again as the greenback retains the bid.
• USD/JPY is currently trading at 109.82, up from a low of 109.71 and below the 109.99 high.

USD/JPY has been accumulating a bid of late but has been unable to get over the line, capped before critical resistance on the 110 handle. US stocks were mainly in the green on Friday, although the DJIA bucked the turned and closed negative. However, the general risk-on mood was tempered by concerns that there will not be a meeting between Trump and Xi in the near future and that the clock is counting down towards the deadline without a deal in sight. 

As far as rates performed, the US 10yr treasury yield fell from 2.65% to 2.63%, while 2yr yields fell from 2.48% to 2.45%. "Futures markets continued to price little chance of any further Fed rate hikes in this cycle, with a 20% chance of a cut by December. Fed speakers included Daly, who said the economy is at a self-sustaining pace; and Bullard, who advocated caution on the reduction of the balance sheet and a rethink on the dot plot projections," analysts at Westpac explained. 

US retail sales on the agenda

Meanwhile, the week will pick up when US data starts to feed in. We start with US CPI, Fed speakers and then retail sales later in the week. 

"We forecast retail sales to rise 0.1% m/m in December, slightly down from 0.2% previously. The shutdown-affected release should continue to reflect a negative impact from lower gasoline prices and a more measured expansion in core sales. That said, we see risks to the upside given the resiliency of the US consumer on the back of a strong labor market and steady wage growth," analysts at TD Securities explained. 

USD/JPY levels

Valeria Bednarik, Chief Analyst at FXStreet explained that the pair holds on to gains above the 61.8% retracement of its 111.44/105.16d decline at 109.05, a strong static support level:

"In the daily chart, it offers a technical stance, given that technical indicators hold flat right above their midlines. The 100 and 200 DMA in the mentioned chart converge above the top of the range, in the 111.50/70 price zone, acting as a long-term line in the sand. The 4 hours chart shows that the price is developing a handful of pips above a mild bullish 100 SMA, which advances above the 200 SMA, also indicating limited selling interest, while technical indicators remain stuck to their midlines, offering no clues on what's next for the pair."