USD/JPY hits two-week high ahead of US manufacturing PMI

The USD/JPY pair maintained strong bid tone and was seen building on to its momentum back above 118.00 handle.

Currently trading around 118.30-35 band, testing session peaks, Tuesday's strong up-move helped the pair to reverse all of its losses recorded in the past two-weeks amid renewed strong greenback buying interest. Expectations for a faster Fed rate-tightening cycle and faster US economic growth in wake of aggressive fiscal spending under the incoming Trump administration continues to underpin the greenback. In fact, the overall US Dollar Index resumed with its strong bullish trajectory and has now moved within striking distance of 14-year highs touched in December. 

Meanwhile, a mildly positive sentiment surrounding European equity markets provided little support to the Japanese Yen's safe-haven appeal and further collaborated to the pair's strong bid tone. Moreover, possibilities of stops getting triggered, on a sustained move above 118.00 handle might have also contributed to the pair's up-surge to the highest level since Dec. 16.

Next on tap would be the US ISM manufacturing PMI print for December, which if matches expectation (53.5), as compared to November's 53.2, would reinforce market expectations and continue boosting the pair further during NA session. 

Technical levels to watch

A follow through buying interest above 118.43 (Dec. 16 high) is likely to boost the pair towards multi-month highs resistance near 118.66 touched on Dec. 15, en-route 119.00 round figure mark. On the downside, 118.00 handle now becomes immediate support, which if broken might drag the pair back towards 117.50 horizontal support and the corrective slide could further get extended back towards 117.00 round figure mark.