USD/JPY climbs to mid-109s as greenback gathers strength on upbeat PMI data

The USD/JPY pair gained traction in the last hour and gained more than 50 pips to reach a fresh 2-day high of 109.47. As of writing, the pair was up 0.5% on the day at 109.40.

Earlier today, the monthly employment report from the U.S. revealed that nonfarm payrolls in January grew by 304,000 to beat the experts' forecast of 165,000. Underlying details of the report showed that the unemployment rate rose to 4% in the same period and the wage inflation as measured by the average hourly earnings increased by 0.1% on a monthly basis to miss the market expectation of 0.3%. The US Dollar Index struggled to make a decisive recovery on mixed readings in the early NA session.

• US: Total nonfarm payroll employment increased by 304K in January vs 165K expected.

However, with both the ISM and Markit Manufacturing PMI reports highlighting a robust expansion in the sector's business activity, the US Dollar Index advanced to 95.64 to help the pair extend its daily rise. At the moment, the DXY is clinging to small gains near 95.60.

• US: Markit Manufacturing PMI comes in at 54.9 in January vs 54.5 expected.
• US: ISM Manufacturing PMI improves to 56.6 in January vs 54.2 expected.

Meanwhile, after starting the day mixed, all three major equity indexes in the United States moved into the positive territory to make it difficult for the safe-haven JPY to show resilience against the dollar.

Technical levels to consider

The pair could encounter the initial resistance at 110 (psychological level) ahead of 110.25 (50-DMA) and 110.50 (Dec. 31, 2018, high). On the downside, supports are located at 109.15 (20-DMA), 108.50 (Jan. 31 low) and 1*9 (Jan. 14 low).