USD/JPY extends rebound and prints fresh daily highs above 107.70

• USD/JPY gains momentum despite a decline in equity prices.
• US dollar recovers strength as Powell speaks and ahead of Trump’s press conference.

The USD/JPY pair broke to the upside after moving sideways for hours during 107.05 and 107.30. It climbed to 107.82, hitting a fresh daily high as the US dollar strengthened across the board.

The US Dollar Index (DXY) erased most of its losses and rebounded from two-month lows, rising back to 98.30. The recovery of the greenback took place as equity price in Wall Street turned negative. The Dow Jones is falling 0.75% and the S&P 500 0.40%. Investors remain caution amid US-China tensions. US President Trump will offer a press conference on Friday regarding China.

Economic data from the US came in mixed. Personal spending dropped more than expected, at a record pace while Personal Income registered an unexpected 10% gain. Later, the Consumer Sentiment Index from the University of Michigan showed a decline to 72.3 in May against expectations of a recovery to 74. Still, the economic numbers continue to have practically no impact in markets.

Chairman Powell is speaking at a Princeton event. He mentioned the Federal Reserve is strongly committed to using its tools. He added, emergency tools are for lending but not for spending.

Short-term levels

The recovery above 107.30/40 put USD/JPY back in the previous range been 107.40 and 108.00. It the positive tone prevails, an approximation to 108.00 seems likely. A break above 108.00 would clear the way to more gains, targeting 108.40. On the flip side, 107.40 has become support again, followed by the 107.00 area.

USD/JPY