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USD/JPY loses recovery momentum before testing 107

  • USD/JPY retreats from daily highs as US Dollar Index clings to modest daily gains.
  • Wall Street’s main indexes look to open higher on Tuesday.
  • ISM Non-Manufacturing PMI is expected to fall sharply in April. 

The USD/JPY pair stayed relatively quiet during the Asian trading hours before gaining traction on broad USD strength in the European session. After advancing to a daily high of 106.90, however, the pair lost its recovery momentum and was last seen trading flat on the day at 106.72.

DXY advances toward 100

The poor performance of major European currencies amid the uncertainty over the European Central Bank’s bond-buying programme helped the greenback find demand on Tuesday. Following Monday’s decisive rebound, the US Dollar Index (DXY) pushed higher and came within a touching distance of the 100 mark, providing a boost to USD/JPY. 

Ahead of the ISM’s Non-Manufacturing PMI data, the DXY is up 0.33% on the day at 99.84. Investors expect the data to show a sharp contraction in the US service sector’s economic activity in April. Nevertheless, the S&P 500 futures are up more than 1% on the day to suggest that Wall Street’s main indexes are likely to open the day in the positive territory.

If the risk sentiment turns positive during the American session, the JPY could struggle to remain resilient against the USD. March Trade Balance data will be featured in the US economic docket as well but is unlikely to impact the pair’s movements.

Technical levels to watch for

 

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