USD/JPY loses momentum ahead of 114

After dropping to 113.25 at the NA session opening, the USD/JPY pair was able to rise back into the positive area as the broad based selling pressure on the greenback eased a bit. As of writing, the pair was trading at 113.63, up 0.22% on the day.

On Monday, the probability of a Fed rate hike in June, shown by the CME Group FedWatch, fell below 70% as the data on Friday from the United States showed that the pace of inflation growth slowed down from March to April. Furthermore, today's Empire State Manufacturing Index dropped below zero, suggesting a contraction of the sector in the NY area. Both of these developments dragged the US Dollar Index lower on Monday. However, the rising yields of the U.S. Treasury bonds helped the index start erasing its losses after falling to 98.67. At the moment, the DXY is at 98.76, losing 0.3% on the day.

In addition to the fading selling pressure on the USD, the pair is receiving some additional boost from the improved risk sentiment. Solid performance seen in crude oil prices allowed the equity indexes in the U.S. start the day higher and extend their gains, making the safe haven JPY less desirable.

Technical outlook

The immediate hurdle for the pair aligns at 114 (psychological level) ahead of 114.60 (Mar. 2 high) and 115.20 (Mar. 9 high). To the downside, supports are located at 113.00 (psychological level), 112.35 (100-DMA), 111.95 (May 3 low).

• USD/JPY back to neutral – UOB
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