USD/JPY upside remains compelling in Tokyo, new highs testing 103.60

Tokyo has started out with a bullish bias for USD/JPY as the price moves up to test the mid-point of the Yen's 103 handle.

Overnight, USD/JPY was a strong bid from below the 103 handle, picking up demand at 102.80 and continuing throughout the US session on its northerly trajectory as U.S. data proved promising ahead the nonfarm payrolls at the end of the week.

A positive set of jobs data will stand the U.S. in better stead as we will, no doubt ,be facing a volatile last quarter with the U.S. presidential race underway while at the same time, investors will be nervous with regard to whether the Fed will be hiking interest rates in 2016.

Wall Street will be a key driver for the Yen as well and it will be a toss-up between U.S. data improving in the last quarter as a positive during earnings season or how a Fed hike could be detrimental to stocks with foreign sales and, just in general, as whether 2017's tighter money conditions doesn't pop the bubble as a critical concer. Furthermore, the Fed is the only possible Bank likely to resume tightening this year while the other core Central Banks such as BOE, ECB, and BOJ all appear reluctant to ease further, which could exacerbate dollar strength and weakness in the Yen.

USD/JPY levels

From a technical point of view, Valeria Bednarik, chief analyst at FXStreet explained, "The pair has broken above its 100 DMA for the first time since February this year, finding intraday buyers on pullbacks to it, now a strong dynamic support around 102.65."

"In the 4 hours chart, technical indicators are giving signs of upward exhaustion, but remain in overbought territory, while the 100 and 200 SMAs are modestly advancing far below the current level."