USD/JPY surge to 106.00 as risk-aversion fades

Bremain led global risk-on is denting the safe-haven appeal of the Japanese currency, with the USD/JPY pair surging back to 106.00 handle. 

Following a four-days of range-bound trade, the pair finally broke on the upside and has now moved closer to last Thursday's high level, erasing majority of its steep losses recorded in the previous week.

The initial up-move was led by disappointing Japanese manufacturing PMI for June that showed contraction in manufacturing sector for fourth consecutive month and was well short of consensus estimates. Adding to it, a slightly better-than-expected US weekly jobless claims data further boosted the pair during early NA trading session. 

Next on tap would be the release of New Home Sales data for the month of May, which is expected to show moderation from multi-year high level and come-in at an annualized rate of 561k.

Meanwhile, broader market sentiment would be driven by the final outcome of the UK-EU referendum voting and could determine the near-term direction for the pair.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "the 1 hour chart showing that the technical indicators have resumed their advance after a modest downward correction from overbought levels. In the 4 hours chart, the 100 SMA offers an immediate resistance around 106.20, with a break above it opening doors for further gains this towards 106.60, the 38.2% retracement of its latest daily decline. Should US stocks maintain their strength, the pair will probably keep advancing, with scope to extend its rally up to 107.50."

"Support levels: 105.55 105.10 104.70
Resistance levels: 106.20 106.60 107.00"