USD/JPY: bulls look to regain 107.50 amid better risk sentiment

The USD/JPY pair broke its overnight consolidation phase at Tokyo open and jumped sharply beyond the 107 handle, mainly driven by the risk-on rally in the Japanese stock markets. The Japanese benchmark index, the Nikkei 225 rallied as high as 22,193.50 points before finishing slightly lower, still up +1.47 percent on the day.

The Asian equities tracked the positive performance on its Wall Street peers, as upbeat US corporate earnings lifted the sentiment, Moreover, ongoing peace talks between South and North Korea also calmed fears and curbed the safe-haven bids for the Yen.

Meanwhile, markets ignored upbeat Japanese trade figures, as rising Treasury yields amid a slew of better US fundamentals overshadowed and thus, aided the renewed upside in the spot.

Later today, there is nothing of note in terms of macro news from the US docket and hence, the sentiment on the global equities will continue to influence the pair. Also, in focus will remain the speeches by Fed’s Williams, Dudley and Quarles for fresh USD moves.

USD/JPY levels to watch

FXStreet’s Analyst, Omkar Godbole noted: “The moving averages: 50, 100 and 200 - are aligned for a bullish move. Meanwhile, the relative strength index (RSI) has built a nice base above 50.00 (in the bullish territory) on the dailies and the 5, 10 and 21-day MAs are biased bullish. Hence, the spot looks set to break above 107.80 and will likely extend gains to 109.00 in the short-run.”

“On the other hand, a break below 106.70 would mark a downside break of the expanding channel and signal the corrective rally has ended. In such a case, the spot could revisit 105.00,” Omkar adds.