USD/JPY recovery loses steam near 111.60, despite risk-on

USD/JPY staged a solid comeback in the Asian session this Monday, rebounding sharply from 111 handle to print daily tops of 111.61, before easing slightly to trade just below the mid-point of 111 handle.

USD/JPY around 200-DMA at 111.50

The spot clings onto recovery gains as risk-on remains at full swing, with markets having settled over last week’s US political uncertainty over Trump investigation. Attention now turns towards the Budget plan due to be released by the Trump administration tomorrow.

Moreover, the spot remains well bid amid a rally in the US yields, as increased expectations that the upcoming FOMC minutes could refuel June Fed rate hike bets bolster shorter-duration treasury yields.  

CME Group FedWatch's odds of a June rate hike rise back to 78.5%

Although the gains remain capped as weekend’s news of North Korea having fired a mid-range missile near Pyongyang on Sunday, underpins the safe-haven flows for the yen somewhat. Also, upbeat Japanese trade data lends some support to the JPY bulls.

Japanese exports rise for 5th straight month, surplus with US drops 4.2%

Next of note for the major remains the US Fedspeaks amid a data-light US docket ahead. Speeches from the FOMC members Harker and Kashkari are due on the cards later today.

USD/JPY Technical levels                 

Valeria Bednarik, Chief Analyst at FXStreet noted: “Shorter term, the 4 hours chart that the price is stuck at a key juncture, converging also with its 200 SMA and the 50% retracement of the mentioned rally. In this last chart, the Momentum indicator heads north, pressuring the 100 level, but the RSI resumed its slide, heading south around 40, indicating persistent selling interest. Support levels: 111.00 110.50 109.90 Resistance levels: 111.60 112.00 112.45.”