- The USD gains some traction after Monday’s stronger-than-expected manufacturing data.
- Improving risk sentiment undermines JPY’s safe-haven demand and remained supportive.
- The upside is likely to remain limited ahead of Tuesday’s US macro data and Powell’s speech.
The USD/JPY pair edged higher on Tuesday, with bulls making a fresh attempt to build on the momentum further beyond the 108.00 round figure mark.
The US Dollar managed to preserve the overnight modest gains led by stronger manufacturing data, which coupled with a positive mood around equity markets undermined the Japanese Yen’s safe-haven demand and remained supportive of the uptick.
Data released on Monday showed that Empire State manufacturing index improved sharply to 4.3 in July from -8.6 previous – marking its biggest increase in more than two years, and helped the greenback to gain some traction, though lacked any strong follow-through.
Against the backdrop of a slightly better-than-expected Chinese macroeconomic data released earlier on Monday, upbeat US data eased concerns over the global economic slowdown and boosted investors’ appetite for perceived riskier assets – like equities.
Meanwhile, a mildly softer tone around the US Treasury bond yields, amid expectations that the Fed will eventually move to cut interest rates later this July might turn out to be the only factor that should keep a lid on any runaway rally for the major, at least for the time being.
Later during the early North-American session, the US economic docket – featuring the release of monthly retail sales figures, followed by the Fed Chair Jerome Powell’s scheduled speech will now be looked upon for some meaningful trading opportunities.
Technical levels to watch