USD/JPY: capped at key resistance 113.80, yen plays catch-up

Currently, USD/JPY is trading at 113.63, down -0.14% on the day, having posted a daily high at 113.82 and low at 113.55.

USD/JPY has been dropped to test the 113.50 level while the yen finally catches up with the weakness in the greenback. There has been a run of poor data of late and that has thrown a spanner in the works for the future outlook of the US economy and subsequent tight situation that will inevitably leave the Fed in.  However, Fed fund futures yields firmed, now pricing a June rate hike as an 85% chance from the previous closes 80%.

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While the Fed might be in a position to hike in June, the median effect of continuously poor data over the next months are what is concerning to dollar bulls. The next major risk for the dollar will be the April industrial production that previously rose 0.5% in Mar driven by the volatile utilities sector. "Manufacturing was soft, particularly in autos, with real data clearly disconnected from surging survey indices," explained analysts at Westpac.

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that from a technical point of view, the downward pressure has eased on the pair, as the price bounced once again from the 113.20 region. "Furthermore, the 4 hours chart shows that the price holds well above a bullish 100 SMA, now around 112.30, whilst technical indicators turned north, and are currently crossing their mid-lines into positive territory. Still, the pair needs to recover above 114.00 to be able to extend its gains beyond the monthly high and up to 114.50, a major Fibonacci resistance."