USD/JPY heading back towards session high

A fresh bout of US Dollar buying interest has emerged in the past hour of trading, with the USD/JPY pair now heading back towards the top end of daily trading range.

Currently trading around 104.30-35 region, the release of stronger-than-expected US services PMI print seems to have negated lower-than-expected new home sales data. The flash version of US Markit services PMI printed 54.8 for October, which surpassed consensus estimates of 52.3 and previous month's 52.3 (revised higher from 51.9 initially reported). Meanwhile, new home sales for the month of September fell short of consensus estimates, pointing to a reading above 600K, and came-in at 593K annualized rate, albeit was better-than previous month's 575K. 

Although the data did little to change market expectations over the timing of next Fed rate-hike action, but provided some impetus and assisted the pair to consolidate closer to multi-month highs touched on Tuesday. 

Earlier during European session, the pair retested 104.00 handle after a Bloomberg Politics poll showed Republican presidential candidate Donald Trump had a lead in Florida over his Democrat opponent Hillary Clinton. The dip, however, was bought into as market seemed convinced that only an unexpected Donald Trump victory at the upcoming US presidential election in Nov. would dim prospects of an imminent Fed rate-hike action at the December meeting.

Focus now shifts to Thursday's monthly durable goods orders data from the US ahead of Japanese inflation data and advance US GDP print  on Friday, which would help investors to determine the pair's next leg of directional move.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "Technically, chances are towards the upside, as the price bounced from its 100 SMA in the 1 hour chart, as technical indicators head north within positive territory. In the 4 hours chart, technical indicators bounced from around their mid-lines, whilst the price is well above a sharply bullish 100 SMA, today at 103.70. As long as this last holds, the risk is towards the upside, with scope to extend its rally beyond the 105.00 figure, should upcoming US data beat expectations."

"Support levels: 103.70 103.30 102.90
Resistance levels: 104.40 104.90 105.35"