USD/JPY touches 113 as USD preserves strength

After falling to a daily low at 112.40 in the late Asian session on improved risk sentiment, the USD/JPY pair reversed course and moved to the positive area and is now hanging around the 113 neighborhood as the greenback remains bid in the NA session. As of writing, the pair was trading at 112.97, up 0.23% on the day. 

Although the markets started the week with a higher risk appetite after the pro-European Union and investors' favorite candidate Emmanuel Macron became the new president of France, the effects faded away as the outcome was not a big surprise and investors have been pricing that probability for the past two weeks. The European stock indexes slipped on profit taking and the American equities had a mixed start with the Dow Jones Industrial Average holding on to small gains and the S&P 500 Index losing 0.15%. 

• European stocks edged lower as investors sold the fact after Macron's victory

Regardless of the changing risk appetite, the pair's price action has been driven mainly by the US Dollar Index's solid performance on Monday.  After falling sharply in the second half of the past week, the DXY started a recovery move as a delayed reaction to heightened expectations of a June hike increased the demand for the greenback against its competitors. At the moment, the index is up 0.54%, at 98.95. Until tomorrow's speeches by the FOMC members Kaplan and Rosengren, the pair may not be able to find a fundamental catalyst as the economic calendar won't be offering any relevant data.

Technical outlook

With a daily close above 113.00/05 (psychological level/May 4 high), the pair could aim for 113.50 (Mar. 17 high) and 114.00 (psychological level). To the downside, supports align at 112.40 (100-DMA) ahead of 111.95 (May 3 low) and 111.20 (50-DMA).

• USD/JPY in a 111.80/113.50 range – UOB
• USD/JPY up-cycle cut to ¥118 at end-2017, but extended to ¥122 at end-2018 – Deutsche Bank