USD/JPY bulls need to break 113.65/75

• USD/JPY capped on the 113 handle.
• The next hurdle is seen in the JPY113.65-JPY113.75 area.

USD/JPY has been capped on the 113 handle yet again, currently, it is trading at 113.08, down -0.02% on the day, having posted a daily high at 113.40 and low at 112.88.

The dollar opened firmer and is heading higher on the 92 handle in the US shift after ending last week with a three-day advance against the yen being the longest streak since the end of November.  

The BoJ and monitoring yields outlook - Nomura

In the absence of immediate domestic events from the US for the week so far, the weekend news in Japan came with PM Abe urging the Bank of Japan governor Kuroda to keep up with efforts to reflate the economy and saying that he will do his utmost to declare an official end to deflation as soon as possible. "However, Abe remains undecided whether to renew Kuroda’s term at the central bank when it expires coming April," noted analysts at UOB Group.

In respect to the Japanese economy, overshadowed by the unprecedented monetary policy, Japan's fiscal policy has also helped fuel the economic expansion. "To be fair, the budget deficit has steadily, albeit slowly, fallen. The 5% deficit in 2017 was the smallest since 2008.  Japan's budget deficit has averaged 6.7% over the past five years," explained analysts at Brown Brothers Harriman.  

US CPI will be key this week

Looking ahead, the week will pick up with US data and CPI will be a key driver towards the end of the week after December's FOMC minutes released last week that kept the policy outlook for 2018 unchanged, (market still expecting three hikes in 2018).

USD/JPY levels

"It held the 100-day moving average, which is found near the JPY112 chart support.  The greenback bounced smartly to test a trend line drawn off early November and late December highs. It is found near JPY113.20 at the start of next week. The next hurdle is seen in the JPY113.65-JPY113.75 area. The technical indicators are mostly constructive, though the Slow Stochastic has not turned higher," analysts at Brown Brothers Harriman explained.