USD/JPY spikes to 1-1/2 week tops, inching closer to 112.00 mark

   “¢   The post-data USD downtick turns out to be short-lived.
   “¢   JPY further weighed down by not so hawkish BoJ statement.  
   “¢   Traders shrug off weaker US bond yields/cautious mood.

The USD/JPY pair quickly reversed softer US data-led dip and surged to 1-1/2 week tops in the last minute.  

The US Dollar dropped further after the Fed’s favourite inflation indicator – core PCE price index disappointed and came in to show a rise of 1.9% y/y in June, below market expectations of 2.0% y/y increase and matched a downwardly revised print for the month of May.  

The post-data USD slide, however, turned out to be short-lived and helped the pair to catch some fresh bids. This coupled with fading market expectations of an immediate BoJ policy tightening continued weighing on the Japanese Yen and remained supportive of the strong bid tone.  

Meanwhile, the prevalent cautious mood around equity markets, which tends to underpin the Japanese Yen’s safe-haven demand, did little to hinder the ongoing positive momentum. Traders even shrugged off a weaker tone surrounding the US Treasury bond yields, with bulls now lift the pair back closer to the 112.00 handle.  

Next of relevance would be the release of Chicago PMI, which followed by the Conference Board’s consumer confidence index would now be looked upon for some fresh bullish impetus.  

Technical levels to watch

A follow-through up-move beyond the 112.00 handle is likely to confront resistance near the 112.25 horizontal zone, above which the pair might be headed towards challenging the 112.80-85 supply zone. On the flip side, the 111.40 area now seems to protect the immediate downside, which if broken might turn the pair vulnerable to test sub-111.00 level.