USD/JPY sticks to modest gains, just below 2-month tops

The USD/JPY pair extended its consolidative price action within 20-25 pips trading range and had a rather muted reaction to the US economic releases.

Currently hovering around the 112.40 region, the pair held on to daily gains near two-month tops and moved little after the US weekly jobless claims unexpectedly dropped to 259K during the week ended September 15. The reading bettered expectations pointing to a rise to 300K, from previous week’s 282K.

Separately, the Philly Fed manufacturing index also surpassed expectations and jumped to a three-month high level of 23.8 in September as compared to last month’s reading of 18.9. 

With markets looking past today's rather uneventful BoJ decision, political uncertainty stemming out of a possible snap election in Japan, coupled with fading safe-haven demand continued weighing on the Japanese Yen and supported the pair's recent up-move to the highest level since July 17.

   •  Japan: Politics back in focus - Nomura

Against the backdrop of continuous improvement in investors' risk appetite and increasing prospects for an additional Fed rate hike move by the end of this year, the pair remains poised to extend its near-term bullish trajectory.

Technical levels to watch

Bulls would be eyeing for a follow through buying interest beyond 112.70-80 area, above which the pair is likely to move past the 113.00 handle and aim towards testing the 113.25 hurdle. 

On the flip side, the 200-day SMA near the 112.20-25 region is likely to protect immediate downside, which if broken could drag the pair below the 112.00 handle towards its next support near 111.85-80 zone.