USD/JPY spikes to one-week tops amid notable USD demand

The USD/JPY pair continued gaining traction through mid-European session on Wednesday and has now jumped to over one-week tops, in the 112.70-75 region.

The pair was seen building on its recovery mover from 3-week lows, touched on Monday and remained supported by persistent US Dollar buying interest and fading safe-haven demand.

Speculation that the US President Donald Trump could nominate a policy hawk to lead the US Federal Reserve, accompanied by surging US Treasury bond yields underpinned the greenback demand. 

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Adding to this, buoyant trading sentiment around European equity markets was seen weighing on the Japanese Yen's safe-haven demand and further collaborated to the pair's strong up-move on Wednesday. 

Next in focus would be speeches by influential FOMC members - New York Fed President William Dudley and Dallas Fed President Robert Kaplan, which along with the US housing market data - housing starts and building permits, would also be looked upon for fresh impetus. 

Technical levels to watch

A follow through buying interest beyond 112.80-85 area should assist the pair to surpass the 113.00 handle and aim towards testing its next major hurdle near the 113.30 region.

On the downside, mid-112.00s now becomes immediate support to defend, which if broken could accelerate the fall back towards the 112.00 handle before the pair eventually drops back to 200-day SMA support near the 111.75 region.