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  • US dollar remains strong in the market on the back of strong economic data.  
  • Higher US yields and record highs in Wall Street adds more support for the USD/JPY rally.  

The USD/JPY pair accelerated to the upside during the American session amid new record highs in Wall Street and US yields climbed to multi-year highs. The pair broke above 114.00 and climbed to 114.40, a level last seen back in November 2017. It was holding around the highs, with a strong bullish tone, up 70 pips from yesterday’s close.

Better-than-expected US data contributed to the positive tone. Private payroll rose 230K in September according to ADP, the best month since February and data regarding the non-manufacturing sector activity (measured by both, ISM and Markit) came in significantly above expectations.  

The Dow Jones was up 0.55% after hitting new all-time highs while the US 10-yield soared to 3.16% from 3.06%, highest since 2011. While data supported the greenback, risk appetite weakened the demand for the yen.  

The greenback head for the highest close since March 2017 against the yen and the consolidation around current levels could clear the way to more gains in the medium term.  

USD/JPY Technical outlook  

Technical readings in the 4 hours chart point to more gains according to Valeria Bednarik, Chief Analyst at FXStreet. “Not only the pair gained upward momentum, but also moving averages which anyway remain well below the current level. The Momentum indicator bounced strongly after flirting with its 100 level, while the RSI maintains its bullish slope despite having entered overbought territory. The next big hurdle comes at the 114.70/80 area, where the pair set monthly highs at the end of 2017.”

Any decline from current levels could be seen as a normal bearish correction. The upside pressure could ease with a retreat back under 114.00.