USD/JPY keep traders guessing after Tankan numbers, trade news occupy driver’s seat

• USD/JPY struggles to extend the latest pullback after Japanese manufacturers turn the most pessimistic since 2013.
• Upbeat trade/Brexit headlines add to the market’s risk recovery.
• A light economic calendar keeps the market’s focus on qualitative catalysts.

Following its another U-turn from the key 109.28/32 resistance zone, USD/JPY looks for direction amid downbeat sentiment of domestic manufacturers and a mild recovery in risk sentiment. The quote takes the rounds to 109.00 by the Tokyo open on Thursday.

Reuters’ Tankan manufacturing poll, which follows the footsteps of Bank of Japan’s (BOJ) key Tankan quarterly survey recently dropped to the lowest since March 2013 during October.

Also questioning the pair sellers were recent headlines from the Fox Business and The Telegraph. While story from the Fox Business increased odds a successful “Phase One” deal, while spotting Chinese trade officials saying the US will not go ahead with December tariff hike, The Telegraph’s update that the United Kingdom’s (UK) witnessed a shock resignation of the opposition Labour party’s Deputy Tom Watson, which in turn favors the ruling Tories and tame market uncertainty surrounding December election.

With this, the US 10-year treasury yields stop previous declines around 1.815% while NIKKEI opens a tad lower following weak signals from Reuters.

The pair’s earlier pullback could be attributed to China’s strong demand for the US to take back some/all of its latest tariffs for the “Phase One” deal and a delay in signing the accord to December than much-anticipated November. Additionally, mixed data and a lack of clear direction from the US Federal Reserve policymakers also added to the quote’s U-turn from key upside barrier.

Looking forward, traders will keep eyes on US-China “phase one” headlines and Brexit details for fresh impulse while also following second-tier data on the economic calendar. “The USD has had little follow-through on the ISM beat. The US growth story remains a bit murky given the Fed's Nowcasts have highlighted some pullback. We think the better value lies in peripheral G10,” says TD Securities.

Technical analysis

Prices need to rise past 109.28/32 region comprising August and October month high to visit 110.00 round figure, failure to do so can drag the quote back to an upward sloping trend line since late-August, around 108.27 now.