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USD/JPY recovers modestly toward mid-112s as US stocks rebound

  • USD/JPY finds support ahead of 112.
  • Building permits and housing starts rebound in the U.S. in November.
  • US Dollar Index struggles to recover above 97.

After losing nearly 70 pips on Monday, the USD/JPY pair extended its slide on Tuesday and touched its lowest level in a week at 112.24 during the European trading hours. However, with a modest recovery in the early NA session, the pair retraced a portion of its daily losses and was last seen trading at 112.52, where it was still down 0.27% on a daily basis.

Earlier in the day, the broad-based selling pressure surrounding the dollar didn't allow to reverse its course. With the latest data from the U.S. showing a rebound in the housing market, the greenback gained some traction. As of writing, the US Dollar Index was down 0.15% on the day at 96.98. According to the U.S. Census Bureau, housing starts and building permits rose 3.2% and 5% on a monthly basis in November, respectively, after both data recording declines in the previous month.

In the meantime, following yesterday's heavy sell-off, major equity indexes in the U.S. started the day decisively higher to reflect an improved market sentiment, which could be providing an additional lift to the pair. At the moment, the Dow Jones Industrial Average and the S&P 500 are up 1% and 0.8%, respectively, while the Nasdaq Composite is adding 0.75% on the day.

Technical levels to consider

The pair could face the first support at 112.20 (Dec. 10 low) ahead of 111.75 (Oct. 29 low) and 111.35 (Oct. 26 low). On the upside, resistances align at 112.65 (100-DMA), 113.10 (50-DMA) and 113.50 (daily high).

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