USD/JPY: Upside capped by 113.50 amid weaker Nikkei 225

The USD/JPY pair is seen consolidating the recovery from NY lows reached just below 113 handle, as the bulls await fresh impetus from the sentiment in Europe for the next push higher.

The upbeat tone seen behind the USD/JPY pair so far this session, is mainly driven by higher treasury yields as dust settles over the Fed and BOJ policy decisions aftermath. The benchmark 10-year US treasury yields advance +0.50% to 2.537%, recovering from post-FOMC troughs of 2.486%, while the 2-year treasury yields rally almost 1% to 1.336%, flirting with 2-day tops.

However, the overnight recovery in the major appears to lack follow-through amid a slightly risk-averse market environment, as the Japanese stocks trade in the red, in turn boosting safe-haven flows in the yen.

Additionally, a muted greenback against most of its major peers also limits the gains in the spot. Focus now shifts towards the fundamentals, with the US consumer sentiment and labor market conditions data to be closely eyed for fresh impetus on the buck. Besides, G20 meeting, especially the Trump-Merkel meeting, will hog the limelight later today.

USD/JPY Technical levels to watch             

The major finds immediate resistance at 113.74/75 (20-DMA/ Feb 22 high). A break above the last, the major could test 113.95 /114 (5-DMA/ round number) and 114.25/49 (10-DMA/ 100-DMA) beyond the last. While to the downside, the immediate support is seen at 113/112.90 (round number/ 2-week low) next at 112.58 (classic S2/ Fib S3) and below that at 111.67/57 (Feb 26 & 7 low).