USD/JPY bull's last breaths before the big slump?

USD/JPY has been in a sideways range between 104.92 and 105.11 between the European and US range, 

In Asia, the price has is even tighter between the 104.97 and 105.06 as the market lacks a catalyst ahead of the economic data showdown in the US Nonfarm Payrolls at the end of the week. 

The risk-on sentiment was underpinned in overnight trade with positive political news in the ex-governor of the European Central Bank accepting the invite to become Italy's Prime Minister. 

Further economic data has given hopes of a faster recovery in both the eurozone and US.

The eurozone Consumer Price Index was higher than expected in January, +0.9%YoY (est. +0.6%YoY), with core CPI rising +1.4% (est. +0.9%YoY).

''However, the bulk of the rise was due to government actions (withdrawal of temporary sales tax cuts, Germany’s initial emissions charges, and other Covid-related actions),'' analysts at Westpac argued. 

Meanwhile, in the US, the political environment has also made some progress in a recent vote whereby  ''the Democratic-controlled US House of Representatives approved a budget outline on Wednesday that would allow them to pass President Joe Biden's proposed $1.9 trillion coronavirus aid plan without Republican support,'' Reuters reported. 

Then, in economic data from the nation, as a potential prelude to the jobs data on Friday,  the US ADP private-sector employment was stronger than expected, rising by 174k in January.

This data beat expectations of an estimated +50k outcome, with the December change revised to -78k from -123k.

The service sector was the bulk of the improvement whereby the US ISM services survey was also stronger than expected rising to 58.7 (est. 56.7, prior 57.7) - the highest level since February 2019.

Overall, the greenback is firm and trading near its strongest in more than two months against the euro and the yen on Thursday.

Sentiment for the dollar has improved recently as progress in coronavirus vaccinations has seen shorts reduce.

At the same time, the yen's net position has also declined after their recent push to the highest levels since October 2016.

The unwind in the yen could be related to a behind the scenes reflation trade as outflows head into to higher-yielding foreign assets.

USD/JPY technical analysis

Meanwhile, there is plenty of resistance up ahead for both the US dollar and USD/JPY.

DXY daily chart

The dollar is up against resistance and it could be due for a correction. 

USD/JPY's analysis was covered in an earlier article as follows:

USD/JPY Price Analysis: Bulls remain in control towards 106, but the downside is compelling