USD/JPY retreats below 113 as Wall Street starts the day lower

• US Dollar Index steadies near 95.20.
• US stocks start the day in the red, 10-year T-bond yield slides.
• Japanese inflation data will be watched next.

The USD/JPY pair, which closed the previous day with small losses below the 113 mark, refreshed its highest level since January at 113.15 earlier today but failed to preserve its bullish momentum. Helped by the weakening risk appetite in the NA session, the USD/JPY pair erased a portion of its daily gains and was last seen trading at 112.90, where it was still up 0.05% on the day.

Although the data from the United States came in better than expectations, the US Dollar Index failed to push higher above the 95 mark as US T-bond yields lost their traction. The 10-year reference is now down 0.7% on the day near $2.855 and the DXY is up 0.4% at 95.20. The weekly report released by the U.S. Department of Labor on Thursday showed that initial jobless claims dropped to 207K, the lowest reading in nearly 50 years. Furthermore, the Philly Fed Manufacturing Index improved to 25.7 to beat the market consensus of 22.

Meanwhile, revived concerns over the Trump administration’s trade policy and disappointing earnings figures force major equity indexes in the United States to start the day in the negative territory. At the moment, both the Dow Jones Industrial Average and the S&P 500 indexes are losing around 0.3%, reflecting a risk-averse environment that benefits traditional safe-havens such as the JPY.

There won’t be any other macroeconomic data releases in the remainder of the day and investors will be waiting for the Japanese inflation data due to be released in the Asian session. Experts expect the annual core-CPI to increase 0.4% in June following May’s 0.3% growth. A higher-than-expected reading could help the JPY continue to remain resilient against the buck and vice versa.

Technical levels to consider

The immediate resistance for the pair aligns at 113.15 (daily high) ahead of 113.75 (Dec. 12 high) and 114.45 (Oct. 27 high). On the downside, supports align at 112.65 (daily low), 112.20 (Jul. 17 low) and 112/111.95 (psychological level/Jul. 12 low).