USD/JPY: Bulls tucked in under the figure, ready to break into 110 handle again

• USD/JPY has held onto gains at the top of the rally, tucked in below the 110 handle.
• USD/JPY benefited from the jump in US yields, rallying from 108.90 to almost 109.60 after the US data, leaving the yen as the worst performer on the day. 

USD/JPY rallied overnight, extending gains since correcting the Fed losses last week when the pair burst through key techncial levels through the 109 handle. Investors were cheering the Fed put which has enabled stocks to rally, sending yields higher as investors move out of bonds again, looking for a return on otherwise idle capital. 

• US stocks rally into the close, spirits high following strong US data

"The US national ISM  manufacturing PMI survey staged an impressive recovery in January, rising to 56.6 from 54.3, led by gains in both the new orders and production sub-indices, with both returning to levels well above long-run averages. At the same time, the soundbites from Sino/US trade talks have been encouraging, albeit lacking detail; Nevertheless, the markets are enthused by the optimism which has also stripped the yen of some of the risk off flows parked there since the Dec rout in stock prices," analysts at Westpac explained. 

USD/JPY levels

• Support levels: 109.50 109.05 108.65    
• Resistance levels: 110.15 110.45 110.90

Valeria Bednarik, Chief Analyst at FXSytreet explained that despite retreating, the pair holds above its 100 and 200 SMA in the 4 hours chart, for the first time above this last since mid-December:

"Technical indicators in the mentioned chart retreated modestly after reaching overbought territory, reflecting the latest retracement rather than suggesting upward exhaustion. The 200 SMA stands at around 109.50, providing a dynamic short-term support, with the bullish case fading on a break below it."