USD/JPY bounces in tandem with Nikkei 225, tests 111.50

USD/JPY erased most losses and now looks to regain 111.50 barrier, as the recovery gains traction in sync with that in the Japanese stocks.

USD/JPY back above 200-DMA at 111.39

The spot met fresh buyers near the 50-DMA support of 111.15, after markets witnessed a slight turnaround in risk condition amid a renewed uptick in treasury yields and Asian equities, especially with Japan’s benchmark, Nikkei 225 index now flirting with 19,600 levels.

However, the recovery may remain short-lived as nervousness will return to markets ahead of Comey’s testimony and Trump’s Budget release next week. Although markets are not willing to buy into an unrealistic Trump budget, which weighs down on the greenback and could cap further recovery gains in USD/JPY.

All eyes now remain on the speech by St. Louis Fed President Bullard amid a data-quiet US docket ahead.

USD/JPY Technical levels                 

Jim Langlands at FX Charts noted: “While the dailies still point lower, the 4 hour charts are recovering after having become oversold and further short term gains would not surprise. If so, look for good resistance in the 111.70/80 range, but a break of which could then see a move towards 112.00 and 112.30, which might be a decent sell area if we get there.”

“On the downside, minor support will be seen at 111.00 and 110.70 ahead of the session low of 110.23. A break of which would then find little support until we reach 109.60, albeit not today. A choppy session in the 111.00/112.00 would not surprise,” Jim adds.