The USD/JPY pair seems to have regained some traction and managed to fill the weekly bearish gap, albeit has struggled to move back above mid-113.00s.
N. Korea’s statement over the weekend that its latest missile test was capable of carrying a large nuclear warhead fretted investors at the start of a new trading week and provided a minor boost to the Japanese Yen’s safe-haven appeal.
Also weighing on the major was disappointing Chinese industrial production data, which renewed worries of an economic slowdown in the world’s second largest economy, and a larger-than-expected jump in the Japanese PPI data.
However, a modest recovery in Asian equity markets, which tends to drive flows away from traditional safe-haven assets, assisted the pair to recovery early losses despite of a subdued US Dollar price-action.
With Friday’s dismal US economic data (monthly retail sales and inflation numbers) doing little to dampen investors’ expectation for an eventual Fed rate-hike move at its June meeting, it would interesting to see if the pair is able to build on the recovery move or runs through some fresh supply at higher levels.
Today’s US economic docket highlights the release of Empire State Manufacturing Index and would be looked upon for short-term trading impetus later during the day.
Technical levels to watch
On a sustained recovery back above mid-113.00s, the pair is likely to aim towards testing 113.80-85 intermediate resistance before heading towards reclaiming the 114.00 handle. On the flip side, weakness below 113.10 level (session low) is likely to get extended towards 112.75 horizontal support en-route 112.50-40 strong support.