USD/JPY: bullish potential keeps fading despite raising yields
|USD/JPY Current price: 113.24
- Japanese strong Machinery Orders data suggest continued growth in capital investment.
- US PPI expected to pick up modestly in September after falling in August.
The USD/JPY pair hovers near the lower end of its weekly range, currently trading a handful of pips above the 113.00, recovering from a daily low of 112.86 alongside US Treasury yields. The pair has lost the positive momentum seen late September, despite US government bond yields, soared to multi-year highs, something quite significant in terms of future trend. The soft tone of equities, undermined by political woes, add pressure on the pair.
Japanese data released overnight was for the most encouraging, as Machinery Orders were sharply up in August, by 6.8% MoM and by 12.6% YoY, largely surpassing the market's expectations. Preliminary Machine Tool Orders for September increased by 2.8%, following a 5.1% gain in August. The strong figures indicate that capital spending is set to continue growing during the current fiscal year. The US will release today PPI data, seen bouncing modestly after August slump. Meanwhile, a modest recovery in yields overnight opposing to the soft tone of European indexes, keep the pair inside a limited range.
The 4 hours chart shows that the pair has been struggling for direction around a bullish 100 SMA since Monday, a sign that speculative interest is not sure on where to go next. Technical indicators in the mentioned chart, however, remain within negative levels, the Momentum directionless and the RSI recovering alongside price, currently at 44. The pair has no signs of an upcoming steeper recovery, as it would need to accelerate through 113.60 to enter bullish ground, while a break below 112.75 should skew the risk toward the downside.
Support levels: 112.75 112.30 111.90
Resistance levels: 113.60 113.95 114.20
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