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USD/JPY firm above 113.00 ahead of US data

  • Spot found support in the mid-112.00s.
  • US 10-year yields in daily highs above 2.36%.
  • Focus on Philly Fed index due later.

After two consecutive daily pullbacks, USD/JPY has managed to gather some buying interest and regain the 113.00 handle and above in the second half of the week.

USD/JPY now looks to US data

The pair has retaken the 113.00 area and beyond after testing lows near 112.80 earlier in the Asian trading hours, all on the back of a moderate rebound in yields of the US 10-year reference.

In fact, yields are orbiting around the 2.36% area, around 5 bps higher than weekly lows in the 2.31% neighbourhood.

In the meantime, recently published US inflation figures tracked by the CPI re-asserted the view of further tightening by the Federal Reserve by year-end and at the same time opened the door for further rate hikes in 2018. The BoJ-Fed policy divergence appears as the main driver of the pair’s price action in the months to come, banning a pick up of geopolitical tensions stemming from the Korean peninsula.

In the US data space, the Philly Fed manufacturing index will grab all the attention later in the session seconded by the weekly report on initial claims. In addition, Cleveland Fed. L.Mester (2018 voter, hawkish), FOMC’s L.Brainard (permanent voter, dovish) and Atlanta Fed R.Kaplan (voter, hawkish) are all due to speak as well.

USD/JPY levels to consider

As of writing the pair is up 0.24% at 113.15 facing the next up barrier at 113.33 (high Nov.16) seconded by 113.58 (10-day sma) and finally 113.92 (high Nov.14). On the other hand, a breach of 112.47 (low Nov.15) would expose 112.28 (55-day sma) and then 111.90 (38.2% Fibo of 107.33-114.73).

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