USD/JPY grinds higher around January 2017 levels on mildly bid Nikkei 225

• USD/JPY seesaws around multi-day top during inactive Asian session.
• Japan Corporate Services Price Index jumps to highest since November 2001 in October.
• Virus woes escalate even as Japan’s daily covid infections print yearly low.
• US data, Fed Minutes keep rate hike hopes on the table but Thanksgiving Day may challenge the bulls.

Having refreshed a multi-day top on Wednesday, USD/JPY hovers around 115.40-50 as Tokyo opens for trading on Thursday. The lackluster moves could be linked to mixed catalysts and an off in the US, due to the Thanksgiving Day holiday.

That said, Japan’s Corporate Services Price Index for October rose past 0.9 prior level but eased below 1.2% forecast to arrive at 1.0, the highest in two decades. On Wednesday, Japan’s Jibun Bank Manufacturing PMI crossed 53.2 prior level with 54.2 figures but lagged behind 54.5 market consensus.

On the other hand, Fed’s preferred inflation gauge, namely Core PCE Price Index, jumped to a 30-year high and the Initial Weekly Jobless Claims also printed welcome readings. Joining the line were upbeat comments from Federal Reserve Bank of San Francisco President and FOMC member Mary Daly, as well as hawkish FOMC Minutes. Alternatively, Durable Goods Orders and GDP figures eased but couldn’t tame the reflation fears.

In addition to the fears of a jump in inflation, COVID-19 woes also underpin the US dollar’s safe-haven demand, helping the USD/JPY buyers. After Austria and the Netherlands, record-high cases in Germany triggered multiple warnings to recall the lockdowns from the region. It’s worth noting though that the virus numbers in Japan dropped recently. “The Tokyo metropolitan government reported five new coronavirus cases on Wednesday, the lowest level on record for this year,” said Kyodo News.

Also challenging the USD/JPY buyers is the latest pullback in the US Treasury yields, from monthly high, as well as an absence of the bond trading due to the US holiday. Even so, Japan’s benchmark equity index Nikkei 225 rises 0.70% on a day while tracking mildly bid S&P 500 Futures.

Amid these plays, the USD/JPY prices are likely to hold the higher range with Japan’s Coincident Index and Leading Index for September likely offering immediate direction. Even so, headlines concerning the covid, inflation and stimulus will be the key to watch.

Technical analysis

A five-week-old ascending trend line near 115.05, coupled with the 115.00 threshold, restricts the USD/JPY pair’s short-term moves. Meanwhile, the late January 2017 peak near 115.65 becomes a tough nut to crack for the bulls considering overbought RSI conditions.