USD/JPY: up through 111.50 key level, move comes on the back of the market buying up dollars

• USD/JPY has been on a tear through the 10 and 21-hr SMAs and spot broke above 111.50.
• 111.50, which was the top of last week’s trading range,  is a significant level.  

The move comes on the back of the market buying up dollars, but traders are likely going to wait to see what the jobs data comes with before chasing this move in the dollar much higher on the 95 handle, (94.6100-95.1000 current range so far).  Afterall, we have heard what the FOMC has to say and we now know where the BoJ stands as well, (that outcome did not leave USDJPY with a strong directional impetus though).  

“The BoJ has strengthened its commitment to YCC and dashed hopes for a clearly hawkish shift. At the same time, however, it has given itself more flexibility in how it reacts to changing circumstances going forward while adopting a wider range on rates before signalling it may step in to limit any deviation from its policy targets” – TD Securities.

The global trade spat  to halt bulls in their gallop

The global trade spat is the only uncertainty out there really, but those risks will unfold as and when, likely to favour the yen and keep a lid on the dollar’s advance towards the 113 handle, banking on a positive outcome from the nonfarm payrolls (NFP) data on Friday, (if the ADP report is a sure enough ‘prelude’ for it being so that is – NFP consensus 192k).  

Meanwhile, the dollar may run out of steam now but a possible test of the 50-hr SMA could be on the cards for those chasing pips higher, and that level falls in at 111.72 – just below the Tenkan resistance level at 111.80. Above there, the net target is 111.90/112.10 zone.  

USD/JPY levels

Above the said target zone, analysts at TD Securities suggested that there should be decent resistance that would emerge around 112.65/80 ahead of the 19 July cycle high of 113.17:

“Global risk appetite remains fragile, however. We do not think the BoJ was dovish enough to offset a notable deterioration in sentiment should one arise. Below 110.50/60, the next major support zone should come into play around the 109.20 area. This region has served as a key pivot in recent months and now broadly corresponds with the 100dma. Below this, and our attention would turn to a test of 108.10.”