USD/JPY jumps back above 107.00 handle but lacks follow-through
• A goodish pickup in the US bond yields helps gain some positive traction.
• Cautious sentiment around equity markets now seemed to cap gains.
• US macro data/Powell’s testimony might provide a fresh directional impetus.
The USD/JPY pair caught some fresh bids during the early NA session and jumped back above the 107.00 handle, albeit seemed lacking any follow-through traction.
Against the backdrop of a subdued US Dollar price action, the latest leg of uptick over the past hour or so could be attributed to a goodish pickup in the US Treasury bond yields, possibly in anticipation of some hawkish comments by the new Fed Chair Jerome Powell.
Powell is to scheduled to make his first major appearance as head of the Federal Reserve and is due to testify before the House Financial Services Committee, which would be closely scrutinized to see if the Fed is ready to raise interest rates more than three times in 2018 and eventually help determine the pair's next leg of directional move.
• Fed Chair Jerome Powell’s hearing in the limelight today – Danske Bank
Meanwhile, a sharp retracement in European equity markets underpinned the Japanese Yen's safe-haven demand and once again kept a lid on the pair's up-move near the 107.10-20 region. Hence, it would be prudent to wait for a follow-through buying interest before positioning for any further near-term appreciating move in the near-term.
Apart from the key event risk, important US macroeconomic releases - durable goods orders data and CB's consumer confidence index would also be looked upon for some short-term trading impetus.
Technical levels to watch
A follow-through buying interest has the potential to continue lifting the pair further towards 107.45-50 intermediate resistance en-route 107.80-90 heavy supply zone. On the flip side, sustained weakness below 106.80 level might accelerate the fall back towards mid-106.00s before the pair eventually drops to test the 106.00 handle.