USD/JPY clings to modest recovery gains, comfortable above 111.00 handle
• A modest USD/US bond yields uptick supportive of the recovery move.
• Positive equities further denting JPY’s safe-haven appeal.
• Fedspeak/US consumer confidence data to provide fresh impetus.
The USD/JPY pair held on to its modest recovery gains through the early European session but seemed struggling to gain any strong follow-through traction.
The report that North Korea was preparing for another ballistic missile launch prompted some fresh safe-haven demand and momentarily dragged the pair below the 111.00 handle.
The initial dip, back closer to the previous session's near 2-1/2 month lows, was quickly bought into and the pair rebounded around 40-pips from session lows, albeit lacked conviction.
A modest pickup in the US Treasury bond yields, which helped the US Dollar to preserve overnight recovery led by stronger housing market data, and a mildly positive trading sentiment around European equity markets remained supportive of the pair's up-move.
Investors, however, seemed reluctant to place aggressive bets amid uncertainty over the highly anticipated US tax reform legislation and growing expectations for a more gradual Fed monetary policy tightening cycle post-December.
Today's US economic docket highlights the release of CB's consumer confidence Index, which along with Fedspeaks and the Fed Chair Designate Jerome Powell's testimony before the Senate Committee would influence the sentiment surrounding the greenback and provide some meaningful impetus.
Omkar Godbole, Analyst and Editor at FXStreet writes: "The technicals are aligned in favor of a corrective rally to 112.00 levels. Also, as per Reuters report, sub-111.00 is under surveillance by Japanese importers and investors. So, it would take another wave of curve flatteners (sharp drop in the 10-year treasury yield) to push the pair down to 110.00 levels. As of now, it appears that the road to 110.00 would include a minor rally to 112.00 levels."