USD/JPY on a tear, sales tax news weigh

USD/JPY has seen aggressive initiated buying action ahead of the Tokyo open, in response to the weekekend news that Japan PM Abe is mulling the possibility of delaying a planned sales tax until October 2019, according to Nikkei, with traders/investors quickly discounting an expected rally in the Nikkei 225 index.

Based on the latest CoT report, there had been plenty of commercial-related selling activity above 110.00, partly explaining why 110.50 had represented such a hard nut to crack. That said, today's fundamental-fueled news have finally caused the buying pressure to absorb and lift the offers, with USD/JPY reaching its highest level at 110.80 so far.

Valeria Bednarik, Chief Analyst at FXStreet, provides some background information on the pair, based on last week's action, noting: "The USD/JPY pair closed the week at the upper end of its latest range, fueled by poor inflation figures released in Japan late last week, showing CPI for April contracted for a second straight month. The reading fueled speculation of some BOJ intervention, either by monetary stimulus or a delay in the sales tax hike announced late last year."

Technically, Valera noted, just ahead of the breakout seen: "The technical indicators are flat within positive territory, whilst the price is above the 100 and 200 SMAs in this last time frame, suggesting the pair may finally break higher this week, particularly if the US economy shows further signs of improvement."