USD/JPY holding above 110 as markets stage a mild recovery

  • Dollar continues to post gains against the Yen as bonds boost the Dollar.
  • Broader market correction sees risk flows edging cautiously out of the safe-haven Yen.

The USD/JPY pairing is testing close to Wednesday's high, near 110.40 as the Greenback corrects the early week's slide,  bolstered by rising Treasury yields.

After a quick decline earlier in the week the USD is grinding higher against the Yen, lifting in Wednesday's trading to continue the technical correction from the week's bottom at 109.55. 

Foreign investment in Japanese stocks contracted further, sinking to ¥-40.8 billion after the previous reading of ¥-108.3 billion, but on the flip side, foreign investment in Japanese bonds surged to ¥1.49 trillion after printing a ¥-475.6 billion decline in the previous period.

Thursday will also bring y/y National CPI figures for Japan beginning late at 23:30 GMT, with the headline figure expected to come in at 0.3%, a notable decline from the previous reading of 0.6% as inflation continues to slump far below the Bank of Japan's inflation target of 2%.

USD/JPY levels to watch

The pair's latest bullish correction isn't necessarily promising further gains, and as FXStreet's own Valeria Bednarik noted, "according to the 4 hours chart, the upside potential is limited, as technical indicators hold below their mid-lines with modest upward slopes, indicating no buying interest. The pair is resting above directionless 100 and 200 moving averages, which converge around 109.85, providing a short-term support."

Support levels: 110.15 109.85 109.55    

Resistance levels: 110.45 110.90 111.34

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