And that means that near-term bias in the pair has turned more bullish. However, I won't expect buyers to get too carried away just yet. Sure, Chinese stocks are higher on the day but they're well off the highs now after the lunch break.
The Shanghai Composite index was up 1.4% at the break but is now just 0.9% higher on the day. But a more telling sign as to why I don't expect yen pairs to push up too high in the coming session is the lack of follow through in US equity futures trading:
The performance on Wall Street overnight felt more like a win and a green day despite stocks ending the day lower. But looking at E-minis, it's telling that the all-clear for stocks to continue to rally once again isn't there just yet.
For USD/JPY, it means that we're not likely to see much upside in the session ahead as long as E-minis continue to trade tepidly as what we've seen so far. There is also further resistance in the pair around 112.90 before offers at 113.00 will help keep gains in-check.
As for downside levels, watch out for tests of the key hourly moving averages above but the real key support level remains that of the upwards trendline:
Price continues to lean on that level and until there is a daily break below it, the upside momentum remains intact still. However, it won't take much for sellers to attempt a break of that if equities capitulate so the focus remains that of the performance of the US cash equity market.