USD/JPY: Recovery loses momentum, holds comfortably above 111
Following the positive inflation figures from Japan, the JPY gathered strength against the USD during the first half of the day and pushed the USD/JPY pair to a three-day low at 110.88. However, as the greenback caught fresh bids in the early NA session on the back of positive data, the pair started to recover its losses. As of writing, the pair is trading at 111.35, still losing 0.45% on the day.
Following the upbeat preliminary GDP growth and personal consumption expenditure price index figures from the U.S., the US Dollar Index surged to a fresh weekly high at 97.46. Short-term U.S. Treasury bond yields also reacted positively to the data, increasing the probability of a June rate hike and further supporting the USD. Even so, the index is having a tough time building on its recent gains as the trading volume thins out towards the end of the week. At the moment, the index is at 97.37, up 0.25% on the day.
- US: Real GDP increased at an annual rate of 1.2% in the first quarter of 2017
- CME Group FedWatch's June hike probability drew close to 90% on US Data
On the other hand, following yesterday's record-setting rally, the major equity indexes in the U.S. remain calm near opening levels, suggesting that the risk appetite is not present at the moment, which allows the JPY to hold on to its gains against the USD.
Technical levels to consider
The pair could encounter a tough resistance at 112 (psychological level/Fibo 50% retracement of April-May uptrend) ahead of 112.40 (20-DMA) and 112.90 (Fibo 23.6% retracement of the same move). On the downside, with a decisive break below 111.20 (50-DMA), the pair could aim for 110.50 (Fibo 23.6% retracement of the same move) and 110 (psychological level).
- USD/JPY further recovery lies above 112.01/13 – Commerzbank