Nikkei relief rally capped by fresh USD/JPY selling

The Japanese stocks set-off Thursday on a firmer footing, extending its post-Brexit relief  rally, although came under pressure subsequently as risk sentiment deteriorated somewhat in early deals after the Japanese industrial output witnessed a bigger-than expected drop in May.

Moreover, looming political uncertainty in the UK triggered by the Brexit vote, with markets awaiting declarations from the Conservative leadership ahead of the Thursday deadline, also keeps investors on the edge. Hence, the yen demand is on the rise on safe-haven flows, in part dragging the Nikkei lower.

At the time of writing, USD/JPY drops -0.17% to 102.66, having failed to resist above 103 handle, while the Nikkei 225 index pares gains to now trade around 15,645 points, up +0.50% on the day.

Looking ahead, the Brexit-related news flow is expected to grab a lot of eyeballs, which will drive the global sentiment and thus, dominate the yen markets. While a set of US macro updates combined with Fed speaks due later in the NA session will be also closely eyed for further momentum on the USD/JPY pair.

Nikkei Technical levels to watch

In terms of technicals , the immediate resistance is located at 15,821 (1h 100-SMA). A break above the last, the major could test 16k mark (20-DMA). While to the downside, the immediate support is seen at 15,364 (5-DMA) and below that at 15k (round figure).