USD/JPY sticks to small daily gains near 111.40
|- US Dollar Index consolidates daily gains below 95.50.
- US 10-year T-bond yield falls nearly 1% on the day.
- Household spending data from Japan will be watched in the Asian session.
The USD/JPY pair rose above the 111.50 mark in the early NA session but failed to hold there as the greenback started consolidating its daily gains. As of writing, the pair was trading at 111.44, adding 0.15% on the day.
The lack of macroeconomic data releases from Japan and the U.S. allowed the pair to start recovering last Friday's losses. Despite the greenback strength, escalating concerns over the trade dispute between the United States and China weighed on the risk sentiment last week and helped the JPY remain strong against its rivals. However, with no new headlines on trade, investors shifted their focus back to the fact that the U.S. economy is performing well enough to allow the Fed to raise rates twice more this year.
Earlier in the day, the US Dollar Index rose to its highest level since July 19 at 95.52 and went into a consolidation phase. A 1% fall seen in the 10-year US T-bond yields seems to be making it difficult for the index to stretch higher as well. At the moment, the DXY is up 0.2% on the day at 95.35.
During the Asian session on Tuesday, the Ministry of Internal Affairs and Communications is going to publish the overall household spending change, which is expected to improve to -1.6%on a yearly basis in June from -3.9% in May. Although a positive reading is likely to help the JPY find demand, the market reaction is unlikely to have a significant impact on the pair's action and the greenback's market valuation could remain as the primary driver.
Technical outlook
The initial resistance for the pair aligns at 111.60 (20-DMA) ahead of 112.15 (Aug. 1 high) and 113.15 (Jul. 18 high). On the downside, supports could be seen at 110.90 (50-DMA), 110.40 (Jul. 3 low) and 110 (psychological level).
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