USD/JPY erase early gains, drops back to 103.00 handle

The USD/JPY pair erased majority of its gains to 3-week high level and dropped to 103.00 handle after Japanese economic minister denied issuance of deficit bonds for additional stimulus.

The minister hinted towards possibility of issuing construction bonds. The markets, however, were disappointed as the announcement failed mention the size of the package and also delay the implementation to end-July.

Immediately after the new, the pair fell sharply before stabilizing around 103.00 handle. Going forward, the USD/JPY traders would continue to keep a close watch on any fresh headlines emerging around the expected fiscal stimulus that would eventually drive the major in the near-term.

Technical levels to watch

Bulls would be disheartened if the pair sustains its weakness back below 103.00 handle, which might negate any near-term bullish expectations and drag the pair back towards 102.50-45 intermediate support before the pair heads back to 101.50-40 important support. On the flip side, move back above 103.40-50 3-week highs immediate resistance opens room for additional near-term bullish momentum, initially towards 103.90 resistance and eventually towards its next major resistance near 104.70-75 area.