USD/JPY near six-week tops ahead of ADP

The greenback remained on the front foot against its Japanese counterpart, with the USD/JPY pair heading back to yesterday's six week highs. 

Spot prolonged its recent upward trajectory and traded with positive bias for the sixth consecutive session. The pair built on previous two-week's recovery gains from 5-month lows touched in mid-April, always supported by improving investors' risk-appetite. 

   •  USD/JPY now targets 112.90 – UOB

With the Wall Street’s fear gauge, the CBOE Volatility Index (VIX) already at suppressed level, near 10-year lows, the pair is benefitting from risk-on flows amid receding geopolitical tensions, which tends to drive flows away from traditional safe-haven assets, including the Japanese Yen.

It would now be interesting to see if the pair is able to build on the ongoing bullish momentum or runs through fresh supply at higher levels on any sort of dovish hints from today’s FOMC decision. 

Today’s US economic docket features the release of ADP report and ISM non-manufacturing PMI, which would be looked upon for short-term trading impetus.

Against the backdrop of recent disappointment from a slew of US macro data, Friday’s monthly jobs report (NFP) would also play an important role in determining the pair’s near-term trajectory. 

Technical levels to watch

A follow through momentum beyond multi-week highs resistance near 112.30 level, leading to a subsequent strength above mid-112.00s, should lift the pair towards 112.70 intermediate resistance ahead of the 113.00 handle.

On the downside, any retracement below the 112.00 handle is likely to find immediate support near 111.85-80 area, which if broken might trigger a near-term corrective slide towards 111.30-25 intermediate support en-route the 111.00 handle.