USD/JPY marching toward first daily close above 113 since mid-March

The USD/JPY pair was able to build on last week's gains on Monday as the interest for the greenback returned to the markets. The pair renewed its highest level at 113.23 in the NA session and has been moving sideways in a tight channel near that level in the last hour. As of writing, the pair was at 113.19, up 0.42% on the day.

The RSI on the daily graph is sitting at its highest level since late December at 67 and is approaching the overbought level of 70, suggesting that there could be a technical correction before the next leg up. If the US Dollar Index continues to struggle to extend its gains above the 99 handle, a retracement in USD/JPY becomes more likely. After touching its daily high at 99.05, the DXY has been consolidating in the 99 neighborhood amid a lack of fresh fundamental catalysts.

• US Dollar consolidates gains near 99

Fed speakers tomorrow could potentially affect the greenback's near-term price action as they might shape the expectations of a 25 bps June rate hike. However, although today Federal Reserve Bank of St. Louis President James Bullard suggested that the data was not justifying continued rate hikes, investors largely ignored his statements as the CME Group FedWatch Tool's probability for a 25 bps hike remained above 80%.

Technical outlook

113.50 (Mar. 17 high) could be seen as the initial hurdle ahead of 114.60 (Mar. 2 high) and 115.20 (Mar. 9 high). On the flip side, supports align at 113.00 (psychological level), 112.40 (100-DMA) ahead of 111.95 (May 3 low).

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