USD/JPY sticks to daily gains near mid-109s

After closing four days in a row with losses, the USD/JPY pair is making a recovery on Tuesday on the back of an improved market sentiment and increasing demand for the greenback. As of writing, the pair, which refreshed its session high at 109.53, is trading at 109.42, gaining 0.4% on the day.

Boosted by the upbeat data from the U.S., the US Dollar Index extended its rise in the early NA session and touched its daily top at 93.52 before easing back to 93.35, where it's still up 0.4% on the day. Regional manufacturing and service sector indexes released by the Federal Reserve Bank of Philadelphia and the Federal Reserve Bank of Richmond both showed that the activity in these sectors continued to expand in August. 

In the meantime, the risk appetite seems to be returning to the markets and providing an additional boost to the pair on Tuesday. The lower demand for the safe-haven U.S. Treasury-bonds pushes their yield higher with the 10-year reference trading at 2.206%, up 1.2% on the day. Moreover, the improved sentiment is also reflected upon the major equity indexes in the U.S. At the moment, the Dow Jons Industrial Average is gaining 0.67% while the S&P 500 is up 0.75%. 

In the early trading hours of the Asian session on Wednesday, Nikkei Manufacturing PMI for August will be released from Japan. However, ahead of the critical Jackson Hole Symposium, the pair's reaction to macro data could remain limited.

Technical outlook

With today's recovery, the RSI indicator on the daily graph is inching higher towards the 50 handle, suggesting that the bearish pressure is fading. 109.90/110 (20-DMA/psychological level) aligns as the initial hurdle for the pair ahead of 110.85 (Aug. 15 high) and 11.40 (50-DMA/100-DMA). On the flip side, supports could be seen at 108.60 (Aug. 21 low), 108 (psychological level) and 106.85 (Nov. 14, 2016, low).

• USD/JPY scope for another test of 111.05 – Commerzbank

Today's data from the U.S.

• Richmond Fed: Service sector firms report improved activity in August
• Richmond Fed: Composite index remained at 14 in August
• U.S. house prices rise 1.6% in second quarter
• Philly Fed: Firm-level general activity index rose to its highest reading in 4 months