USD/JPY advances to 109.70 as USD gathers strength on upbeat data

The USD/JPY pair, which was able to close the previous week flat after a decisive recovery in the second half of the week, eased to a daily low of 109.37 during the European morning before reversing its course and advancing into the positive territory in the last hour. As of writing, the pair was trading at 109.70, adding 0.15% on the day.

The pair's price action on Monday seems to be dominated by the USD's market valuation. The US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, renewed its 10-day low at 93.63 earlier today before gaining traction on an upbeat macroeconomic data release from the United States. At the moment, the index is at 94, slightly below its opening level. The data released by the ISM-NY showed that the headline Current Business Conditions index improved to 66.9 in May from 64.3 in April.

On the other hand,  as a traditional safe-haven, the JPY is struggling to show resilience against the buck with the risk-on mood starting to take control of the markets. 

Both the Dow Jones Industrial Average and the S&P 500 is now successfully building on last Friday's gains by gaining 0.75% and 0.35% respectively. Furthermore, the 10-year T-bond yields, which show a strong positive correlation with the USD/JPY pair, is now up around 1%.

Technical levels to consider

On the upside, the immediate resistance is located at 109.80 (20-DMA). A decisive break above this level could open the door for further gains toward the critical 109.95/110 (200-DMA/psychological level) area ahead of 110.45 (May 15 high). On the downside, supports could be seen at 109.40 (Jun. 4 low), 108.90 (50-DMA) and 107.75 (100-DMA).