USD/JPY off lows, still struggling to extend the momentum beyond 112.00 mark

   •  Risk-on mood/US-China trade optimism continues to undermine JPY’s safe-haven demand.
   •  A goodish pickup in the US bond yields/a modest USD uptick further provides a minor boost. 
   •  Disappointing US industrial production/capacity utilization data seemed to cap strong gains.

The USD/JPY pair jumped to the top end of its daily trading range in the last hour, albeit continued with its struggle to extend the momentum further beyond the 112.00 handle.

Against the backdrop of growing optimism over a possible US-China trade deal, the prevalent risk-on mood was seen undermining the Japanese Yen's relative safe-haven demand and helped limit the pair's early downtick.

Improving risk sentiment was evident from a positive mood around equity markets and was further reinforced by a goodish pickup in the US Treasury bond yields, which eventually provided a minor lift to the major.

The intraday bounce got an additional boost from a modest US Dollar uptick, though lacked any strong conviction following the disappointing release of industrial production/capacity utilization data from the US.

It would now be interesting to see if the pair is able to capitalize on the move or continues with its struggle to sustain at higher levels as the focus now shifts to a slew of Chinese macro data, due during the Asian session on Wednesday.

Technical levels to watch

Valeria Bednarik, FXStreet own American Chief Analyst writes: “The case for a downward extension will be clearer once below 111.80 and firmer, should the pair extend its decline below 111.50. The upside remains capped by selling interest at around 112.13, the yearly high, with the tide changing only on a clear break above the level.“ 

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