USD/JPY recovers modestly from mid-112s as US stocks turn green

The USD/JPY pair eased to a fresh daily low at 112.46 in the early NA session before retracing some of its losses. As of writing, the pair was trading at 112.70, losing 0.12% on the day.

The pair's retreat on Thursday seems to be a product of a broad-based greenback weakness. After inching higher to a new 5-week top at 93.50 in the early European session, the US Dollar Index reversed course and fell towards the 93 handle after today's macroeconomic data from the U.S. failed to provide an extra boost.

Although the third estimate of the Q2 real GDP growth came in at 3.1%, beating the market estimate of 3%, other data released by the US Department of Labor showed that the weekly initial jobless claims increased to 272,000 from 260,000. Further details of the report suggested that hurricanes Irma and Harvey impacted the reading negatively. 

Nevertheless, today's retreat witnessed in the DXY looks like a technical correction of the recent rally and as long as the index remains above the 93 mark at the end of the day, the USD/JPY pair is likely to gain traction again in the near-term.

On the other hand, after starting the day lower, major equity indexes in the U.S. turned positive with the Dow Jones and the S&P 500 gaining 0.15% and 0.5% at the moment, making it difficult for the traditional safe-haven JPY to gather further strength against the buck.

In the early trading hours of the Asian session on Friday, the economic docket from Japan will feature the national consumer price index and the unemployment rate. The CPI is expected to improve to 0.7% from 0.4% on a yearly basis in August while the unemployment rate is estimated to remain steady at 2.8%. Unless the data show a substantial divergence from market expectations, the price reaction should stay somewhat limited.

Technical outlook

Despite today's drop, the RSI indicator on the daily graph remains above the 50 handle, suggesting that bulls are still in control. The pair could face the immediate resistance at 113.00 (psychological level) followed by 113.50 (Jul. 14 high) and 114.50 (Jul. 11 high). On the downside, supports are located at 112.00 (psychological level), 111.45 (200-DMA) and 110.90 (20-DMA).

• USD/JPY faces a potential correction lower near term – Danske Bank 

Today's data from the U.S.

• US: Weekly initial claims was 272,000, an increase of 12,000 from previous week
• US: Real GDP increased at an annual rate of 3.1% in the second quarter of 2017
• US: International trade deficit was $62.9 bln in Aug, down $0.9 bln from $63.9 bln in July
• US: Wholesale inventories for Aug were estimated at $608.4 bln, up 1.0% from July 2017