USD/JPY recovers modestly on robust PMI data

USD/JPY recovers modestly on robust PMI data

6 July 2017, 18:09
Roman Vashchilin

After testing the 113 handle in the early NA session, the USD/JPY
 pair started to retrace its losses on the back of better-than-expected non-manufacturing business activity reports from the U.S. At the moment, the pair is trading at 113.25, only a few pips below its opening level.

The first data from the U.S. on Thursday showed that the employment growth in the private sector decreased to 158K in June from 230K (revised from 253K) in May and failed to meet the market expectation of 185K. Following the disappointing ADP data, the US Dollar Index eased to a fresh 3-day low at 95.65. Pressured by the weak greenback, the USD/JPY pair came under pressure.

  • US: Private sector employment increased by 158,000 jobs in June - ADP

However, later in the session, as Markit and ISM released their non-manufacturing PMI figures that showed a strong expansion of activity in the service sector in the U.S., the DXY gained traction. As of writing, the index was at 95.75, still down 0.23% on the day. 

  • US: Business activity in service sector increased at fastest pace since January in June - Markit
  • US: Economic activity in non-manufacturing sector grew in June for 90th consecutive month - ISM

On the other hand, the risk appetite seems to have faded away on Thursday as heavy losses seen in the European major equity indexes forced the U.S. stocks to start the day under pressure. In fact, both the Dow Jones Industrial Average and the S&P 500 indexes were losing 0.5% at the time of writing. Now with no more data left in the day, the market sentiment could continue to impact the pair's price action until tomorrow's Nonfarm Payroll report from the U.S.

Technical outlook

Regardless of the recent fluctuation, the RSI indicators on the H1 and the H4 charts continue to show neutral conditions for the pair in the near-term. On the downside, 112.65 (200-DMA) is the first significant support level ahead of 112.00 (psychological level) and 111.35 (100-DMA). In the meantime, resistances could be seen at 113.70 (Jul. 5 high), 114.35 (May 10 high) and 115 (psychological level).

  • USD/JPY: Potential for a little more upside - Westpac
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