USD/JPY stuck in a tight range in 109.30s, lacking impetus

• USD/JPY is in a consolidation phase and lacks impetus.
• US data was poor overnight and a weight on bullish attempts into year-end. 

USD/JPY is currently trading at 109.36 and is stuck in a tight range of between 109.29 and 109.40. USD/JPY has been consolidating into the last day for the week in Asia, but it slipped 
from 109.60 to as low as 109.18 overnight with US Treasury yields falling due to a very poor Philly Fed report and some potential flow related to US politics as we turn the corner into 2020.

US stocks were resilient to worse than expected second-tier data, and instead, investors continued to cheer the prospects of a US/Sino trade deal being inked in the New Year following an 18-month deadlock of trade disputes between the two largest economic powers of the world.

Firstly, US Jobless Claims rose from 1671k to 1722k (vs 1676k expected). Secondly, the Philadelphia Fed business survey fell from 10.4 in Nov to 0.3 in Dec (vs 8.0 expected). Thirdly, Existing Home Sales fell 1.7% in Nov (vs -0.4% expected). Lastly, the Conference Board’s leading index was flat in Nov (vs +0.1% expected).

We also had St. Louis Fed President Bullard who is notoriously dovish, commenting in a WSJ interview that rates can remain on hold in 2020, arguing that the hike in Dec 2018 was a mistake.

As for rates, analysts at Westpac noted that "the US 10-year yields are also little changed net at 1.91%, but were above 1.94% going into the Philly Fed and jobless claims data, slipping back to 1.90% in the following hours."

"Markets are pricing a near-zero chance of easing at the next Fed meeting on 29 January but a terminal rate of 1.36% (vs Fed’s mid-rate at 1.63% currently)," the analysts added. 

USD/JPY levels

The latest data came in the Japanese CPI, but this gave little surprise and thus had no impact on the price:

• Japan Headline CPI: 0.5% YoY (expected 0.5%)

The USD/JPY pair is bearish in the short-term as the 4-hour chart shows that it finally moved away from its 20 SMA, which now gains bearish strength above the current level. Technical indicators have pared their declines, but remain at daily lows. The next relevant support is 108.90, with a break below the level favoring a bearish extension during the last trading day of the week.

Valeria Bednarik, the Chief analyst at FXStreet explained. 

• Support levels: 108.90 108.60 108.25.
• Resistance levels: 109.40 109.75 110.00 .