USD/JPY sticks to recovery gains, but remains capped below 111.00 handle

Haresh Menghani FXStreet

• Goodish USD recovery helps bounce off lows.
• Positive US bond yields supportive of the move.
• Risk-off environment capping additional gains.

The USD/JPY pair held on to its strong recovery gains, with bulls now eyeing a move beyond the 111.00 handle for fresh impetus.

After an initial dip to fresh 4-month lows, near the 110.20 region, the pair staged a smart recovery and so far, seems to have snapped seven consecutive days of losing streak amid reviving US Dollar demand.

A goodish pickup in the US Treasury bond yields, to some extent, helped ease the prevalent strong bearish pressure surrounding the greenback and supported a minor rebound from closer to the key 110.00 psychological mark.

Meanwhile, a mildly negative trading sentiment around European equity markets underpinned the Japanese Yen's safe-haven demand and was seen capping additional gains, at least for the time being.

Today's relatively thin US economic docket, featuring the release of industrial production and capacity utilization data, is unlikely to act as a game changer and hence, the pair remains at the mercy of USD price dynamics and broader market risk sentiment.

Technical levels to watch

A sustained break through the 111.00 handle is likely to trigger a short-covering bounce and lift the pair back towards the very important 200-day SMA hurdle near the 111.65-70 reigon.

On the flip side, weakness back below 110.40 level might continue to find some support near the 110.00 region, which if broken could drag the pair towards its next support near the 109.70-65 zone.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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