USD/JPY: consolidating reversal from hourly cloud 110.30

Currently, USD/JPY is trading at 110.70, down 0.00% on the day, having posted a daily high at 110.84 and low at 110.67.

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USD/JPY was drifting away from the 110.80 resistance, but consolidating in a quiet start in Tokyo. The markets are potentially subdued leading into the nonfarm payrolls data at the end of the week, noting the mixed day on Wall Street, although there are still a handful of key events that attention will be paid to.

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Overnight, the US ADP report was also a mixed bag but only an anchor on the dollar momentarily before the greenback recovered to this aforementioned resistance later in the shift. However, the dollar was not out of the woods all day and Fed's Bullard came across bearish calling the median dot plot FOMC forecast for one more hike this year as “inappropriate”. Mester, on the other hand, said further hikes would be needed.

From here, a potential catalyst could come in the eurozone. Markit’s service sector PMIs are released across the region but the BoE meeting and Inflation Report will be the main focus, as noted by analysts at Westpac, adding, the last BoE meeting saw 3 dissenters in favour of a hike, but this meeting should produce 2, with one of the dissenters departing the MPC. Markets focused on the risks of a more hawkish slant in the wake of rate rise signalling from the Bank’s Chief Economist Haldane and Governor Carney."  

USD/JPY levels

USD/JPY is caught within a narrow range between aformentioned resistance and the hourly cloud base at 110.30. Meanwhile, Valeria Bednarik, chief analyst at FXStreet explained in the 4 hours chart, the price retreated after failing to settle above the 38.2% retracement of its latest decline between 112.18 and 109.91 around 110.80. 

"The 100 SMA extended its decline below the 200 SMA, both far above the current level, as technical indicators hover around their mid-lines with no clear directional strength. Overall, the risk remains towards the downside, with a break below 109.90 required to confirm a new leg lower towards 108.80," noted Valeria Bednarik.