USD/JPY retreats from multi-month highs, trades above 110 ahead of US data dump

• Major European equity indexes register decisive gains on Friday.
• US Dollar Index rebounds to 97.50 area ahead of mid-tier data releases.
• 10-year US Treasury bond rises for second straight day.

The USD/JPY pair climbed to its highest level since mid-May at 110.29 during the Asian trading hours as the positive market sentiment made it difficult for the safe-haven JPY to find demand. The upbeat macroeconomic data releases from China eased concerns over a global economic slowdown and allowed risk-on flows to dominate the markets. Industrial Production and Retail Sales both rose more than expected in 2019 in China and the economy expanded 6% as expected.

Reflecting the heightened optimism, major European equity indexes are adding between 0.65% and 1% on the day and the 10-year US Treasury bond yield, which closed the previous day 1.35% higher, is up 0.5%.

US Dollar Index gains traction

On the other hand, the broad-based selling pressure surrounding major European currencies help the JPY stay resilient against the USD with the EUR/JPY and the GBP/JPY pairs dropping 0.2% and 0.3%, respectively. Nevertheless, the USD is also taking advantage of this situation and keeping the pair afloat above the 110 mark.

In the second half of the day, Industrial Production, UOM Consumer Confidence Index, Housing Starts and Building Permits data from the US will be looked upon for fresh impetus. Ahead of these data, the US Dollar Index is up 0.2% on the day at 97.50. FOMC members Quarles, Bowman and Harker will be delivering speeches during the American trading hours as well. 

Technical levels to watch for