USD/JPY extends recovery in tandem with T-yields, 111.00 eyed

The USD/JPY pair extends its gradual recovery mode from 7-week lows into Asia, with the bulls now aiming to conquer 111 handle amid higher Japanese equities and Treasury yields.

USD/JPY regains 5-DMA at 110.49

The spot derived support from a solid rebound staged by Treasury yields across the curve, which pulled the US dollar away from multi-month troughs reached against its main competitors  earlier this week. The USD index now flirts with 93 handle, steadily recovering from 92.64 levels.

On Tuesday, the USD/JPY pair hit fresh 7-week lows of 109.93 after the greenback met fresh supply on the release of worse-than expected US ISM manufacturing PMI data.

However, the sentiment improved quickly amid positive Wall Street stocks, with Dow hitting record high, which dampened the safe-haven bids for the Yen, propelling the major to regain 110 handle and beyond.

Looking ahead, the pair could struggle to take on the recovery further towards 111 levels, as renewed weakness in oil prices could weigh down on the risk sentiment, while increased cautiousness ahead of the US ADP jobs report could also keep a lid on the prices.

USD/JPY Technical levels                 

To the topside, a daily close above 10-DMA located at 110.88 would shift risk in favor of a re-test of 111.43 (100-DMA) beyond which 111.65/69 (50 & 20-DMA) would be back on sight. A break below 109.93 (7-week low) would open doors for 109.50 (psychological levels). A break lower would yield a test of 109 (round number).