USD/JPY inches higher toward 109 on upbeat mood, USD recovery

• Global equity indexes kick off 2020 on strong footing. 
• Wall Street looks to open sharply higher on Thursday.
• US Dollar Index rebounds from multi-month lows, sits above 96.60.

The USD/JPY pair lost nearly 100 pips during the first half of the week as the USD felt the selling pressure coming from year-end position adjustments. With investors returning from the New Year break, the pair has started to retrace its last fall and was last seen trading at 108.82, adding 0.11% on the day.

Stocks rally to start 2020

The upbeat market mood as reflected by the strong performances of global equity indexes on the first trading day of 2020 makes it difficult for the JPY to find demand as a safe-haven. As of writing, the Euro Stoxx 50 Index was up 1.33% on the day while Germany' DAX and the UK's FTSE were adding 0.75% and 1%, respectively.

Confirming the risk-on atmosphere, the S&P 500 futures are up 0.6% to suggest that Wall Street's main indexes are likely to climb to fresh all-time highs following the opening bell.

In the meantime, the US Dollar Index is erasing the losses it suffered since Christmas and was up 0.2% at 96.64 at the time of press. The US economic docket on Thursday will feature the IHS Markit's Manufacturing PMI (final) reading for December as well as the weekly Jobless Claims.

Technical levels to watch for