Although the USD/JPY pair dropped sharply in the early NA session on dismal macro data from the United States, it was able to find support at 111.35. As of writing, the pair is trading at 111.50, up 0.18% on the day.
After a calm start to the day, major equity indexes in the U.S. gathered momentum, suggesting that the market sentiment is improving in the session. At the moment, the Dow Jones Industrial Average is gainins 0.15% while the S&P 500 is up 0.1%. The higher risk appetite is making it difficult for the JPY to gain further strength against the greenback.
On the other hand, it didn't take long for the US Dollar Index to start recovering its data-led losses. After refreshing its 12-day low at 96.80, the index rebounded to 96.92, where it's still losing 0.06% on the day. At the beginning of the NA session, the data from the U.S. showed that the Chicago Fed National Activity index moved into the negative territory while the Durable Goods Orders recorded a contraction for the second month in a row in May.
- US: Chicago Fed National Activity Index was –0.26 in May, down from +0.57 in April
- US: New orders for manufactured durable goods in May decreased $2.5 billion
Tomorrow's macroeconomic calendar won't be offering any data that could directly impact the pair's price action. Ahead of Fed Chairwoman Yellen's speech later in the NA session on Tuesday, the pair could continue to move in a consolidation channel.
Technical outlook
Since the beginning of last week, the RSI on the daily graph is moving sideways near the 50 handle, suggesting that the pair is neutral in the short-term. 111.50 (50-DMA/100-DMA) could be seen as the first short term resistance ahead of 112.25 (200-DMA) and 112.75 (May 17 high). On the downside, supports are located at 111.00 (Jun. 21 low/psychological level), 110.60 (20-DMA) and 110 (psychological level).
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