USD/JPY jumps back closer to 1-1/2 month top

Having touched a session low of 112.10 level, the USD/JPY pair regained traction and has now jumped to fresh session tops near 112.80-85 region.

The pair witnessed a bearish gap opening on Monday in wake of the Tokyo Metropolitan Assembly election, where the Japanese Prime Minister Abe's Liberal Democratic Party suffered a major defeat. 

Early weakness, however, turned out to be short-lived and the pair quickly recovered back closer to 1-1/2 month highs touched last Thursday amid a modest pick-up in the US Dollar demand.

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This coupled with the prevalent risk-on mood further weighed on the Japanese Yen's safe-haven demand and collaborated to the pair's up-move through early European trading session.

Next of relevance would be the release of US ISM manufacturing PMI, which would influence sentiment surrounding the greenback and provide some fresh impetus for the pair's movement later during early NA session.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: “The bullish price action on the monthly chart in the wake of the yield curve steepening suggests the spot is likely to test 113.00-113.20 (symmetrical triangle resistance) levels. A break higher depends on the further steepening of the yield curve, but if happens would open doors for 116.90 levels (resistance offered by the trend line sloping lower from June 2015 high and Dec 2015 high). On the downside, only a daily close below 112.00 (monthly 10-MA) would signal bullish invalidation.”