USD/JPY bulls now eyeing a move beyond 113.00 handle
• Easing US political jitters and tax bill optimism lifts USD.
• Fading JPY safe-haven demand provides an additional boost.
• Outlook favors a strong move further beyond 113.00 handle.
After Friday's volatile swing, the USD/JPY pair opened with a bullish gap and spiked back closer to the 113.00 handle on Monday.
The pair on Friday was hammered down to an intraday low level of 111.40 following the faulty ABC report on former National Security adviser Michael Flynn. The news agency mistakenly states Flynn was given orders to contact Russian officials, pre-election vs post-election, and helped the pair to quickly recover from lows.
Adding to this, the passage of the US tax overhaul bill provided a fresh boost to the US Dollar on Monday and has been one of the key factors driving the pair higher.
The fiscal policy news is now perceived to accelerate the need for aggressive Fed monetary policy tightening cycle and the same was being reinforced by a sharp rally in the US Treasury bond yields. , Hence, a move beyond the 113.00 handle, led by a follow-through short-covering, now seems a distinct possibility.
Moreover, fading demand for traditional safe-haven assets was also seen weighing on the Japanese Yen and was further seen fueling the pair's strong move at the start of a new trading week.
Today's release of the US factory orders data is unlikely to act as a major game changer, but would still be looked upon for some trading opportunities later during the NA session.
Technical levels to watch
Sustained move beyond the 113.00 handle is likely to accelerate the up-move towards 113.40-45 hurdle en-route 113.65 horizontal resistance. On the flip side, the 112.60-55 region now becomes an immediate support to defend, which if broken could accelerate the slide back towards the 112.10-112.00 strong support.