While we still consider the midterm to be for the USD/JPY (particularly due to the fact that the Fed is to continue to flooding markets with billions in liquidity to avoid a funding crisis in the repo market), and market participants, according to the Fed Watch Tool, still expect at least one 25 basis point cut in 2020 with a likelihood of 60%, resulting in limited upside potential for the USD/JPY . So we have to admit that current market conditions are not very favourable for the JPY.
With US coming in at 2.3% year-on-year for last December, the highest level since October 2018, and US Retail Sales (also known as "backbone of the US economy" adding more than 30% to the US GDP) on Thursday matching expectations, the easing potential for the Fed seems limited, leaving, in our opinion, only a broad risk-off as a potential driver lower in the USD/JPY on the table.
And recently, with the signing of the Phase-1 trade deal between the US and China on Wednesday, chances seem good that no near-term tensions between the two countries arise, market conditions should see low and thus unfavourable conditions the JPY.
That said, a sustainable push above 110.00, activating 110.70 is very likely, especially as long as the USD/JPY keeps on trading above 109.50.
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