USD/JPY deflates from 114.80 ahead of US ISM

The Japanese yen has reverted the initial weakness vs. the buck, prompting USD/JPY to deflate from highs near 115.00 to the current 114.30 region.

USD/JPY supported by risk-on, falters near 115.00

After dropping as low as the 114.80/85 band vs. the dollar in early trade, or fresh 10-month lows, JPY managed to gather some attention and reclaim part of the ground lost, sending spot back to the current 114.30 region.

The recovery of the risk-on trade following yesterday’s deal at the OPEC meeting and the subsequent rally in crude oil prices has initially lifted the pair to the boundaries of the critical barrier at the 115.00 handle, although it run out of steam soon afterwards.

The underlying outlook on the pair keeps pointing to further gains in the near to medium term, always supported by the widening spread in yields between US 10-year and its JGB peer, propped up at the same time by the tighter monetary conditions in the US.

Additionally, JPY stays under pressure on the positioning front, as speculative net longs continued to grind lower during the week ended on November 22 to levels last seen in early January, as per the latest CFTC report.

USD/JPY levels to consider

As of writing the pair is losing 0.13% at 114.30 facing the immediate support at 113.91 (high Nov.25) followed by 111.32 (low Nov.28) and then 109.68 (20-day sma). On the upside, a surpass of 114.83 (high Dec.1) would open the door to 114.89 (high Feb.14) and finally 116.86 (78.6% Fibo of the 2016 drop).