USD/JPY consolidating bull rally into 108 handle on US/Sino trade deal optimism

• Bullish geopolitical undertones in the form of a U/Sino 'phae 1' trade deal help lift USD/JPY onto the 108 handle.
• Key data in the week could throw cold water on positive trade sentiment. 

USD/JPY starts out the week flat to Friday's close after markets rallied at the end of the week. The prospects of a full-on trade deal between the US and China as trade negotiations take shape in the form of a phase 1 deal between the two nations lifted USD/JPY to a fresh high, with bulls scoring a high of 108.62 having moved up from out of the 107 handle.

Following the positive geopolitical headlines, U.S. stocks moved higher and the Dow Jones Industrial Average climbed over 500 points making for a 0.9% rise on the week. The up-beat tones were weighing on the Yen which fell to its lowest level against the US Dollar since 1st August as safe havens underperformed.

Details of US/Sino trade deal yet to be revealed 

A partial trade deal had been agreed and announced into the close on Friday, with further talks set for November:

 "Details are yet to be revealed but the key elements appear to be China’s commitment to substantial increases in imports of US agricultural products and some sort of pledges on intellectual property and currency policy, while the US says it will not proceed with the tariff increase (25% to 30% on $250bn of imports) that was set to take effect tomorrow,"

analysts at Westpac explained. 

As traders await the details of the phase 1 trade agreement, there will also be a keen focus on US Retail Sales and Chinese trade data as potential catalysts for the pair - Another weak trade report from China could be a reminder of the damage already done to the global economy with respect to trade wars while a miss in US Retail Sales will firm prospects of a Federal Reserve rate cut later this month. "Markets are pricing 16bp of easing at the 31 October meeting and a terminal rate of 1.24% (vs 1.88% currently)," analysts at Westpac explained. 

USD/JPY levels