USD/JPY rises back above 110.00, still limited by the 20-SMA

• USD/JPY gained momentum during US session. 
• US data boosted the greenback. 
• Yen weakened amid a recovery in Wall Street. 

The USD/JPY pair received an impulse from US data and a recovery in US equity markets. It rose back above 110.00 erasing daily losses. 

The greenback was rising in the market and accelerated after the release of data. The US ISM non-manufacturing came in above expectations, reaching in January 59.9 (vs 56.6).

“The services sector is growing at a rapid clip: the score of 59.9 may have missed the round level of 60 but clearly beat expectations for a level of 56.5. In addition, the new orders component jumped to 62.7 points, the highest since 2011. The employment component leaped to 61.6 points, the best figure since at least 1997, when records began. And perhaps the icing on the cake came from the prices paid component: a rise to almost 62 points from 59.9 beforehand. Inflation has been the missing component and the forward-looking figure for the largest sector shows it is on the move”, said Yohay Elam, FX analyst.

USD/JPY peaked at 110.25, 25 pips below Friday’s high after the data. It erased most of the day’s losses and extended US session gains.  As of writing it was trading around 110.05/10, marginally lower for the day. 

Besides US data supporting the greenback, the yen weakened during the last hours amid a recovery in equity prices in Wall Street. The Dow Jones was down 0.19% at 25,462 after rising 200 points from the lows. Despite trimming losses, the index was still looking vulnerable. An environment with more risk aversion could trigger more gains for the yen. 

USD/JPY Levels 

To the upside, USD/JPY continued to be limited around 110.25 (20-day moving average); a consolidation on top could clear the way for an extension of the recovery. The next resistance levels might be seen at 110.80 and 111.60. On the flip side, 109.70 is the key short-term support, followed by 109.40 and 109.05.