USD/JPY once again fails to make it through 112.50-60 supply zone

   •  Subdued USD price action fails to provide any fresh bullish impetus.
   •  Cautious equity markets further collaborate towards capping gains.
   •  Investors now eye Powell’s testimony for fresh directional impetus.

The USD/JPY pair regained positive traction on Tuesday but once again failed to make it through the 112.50-60 supply zone. 

Despite yesterday's upbeat US economic data - monthly retail sales data and Empire State manufacturing index, the US Dollar failed to catch any bids and did little to provide any fresh bullish impetus to the major.

With the greenback extending its subdued price action through the Asian session on Tuesday, a weaker tone around equity markets underpinned the Japanese Yen's safe-haven appeal and further collaborated towards capping any meaningful up-move for the major. 

However, a modest uptick in the US Treasury bond yields, amid firming Fed rate hike expectations, extended some support and helped the pair to hold with a mildly positive bias. Hence, the Fed Chair Jerome Powell's testimony before the Senate Banking Committee will be looked upon for fresh clues over the central bank's view on monetary policy and fresh directional impetus.

Ahead of the key event, the US economic docket, featuring the release of June industrial production and capacity utilization data, will also be looked upon to grab some short-term trading opportunities. 

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes, “USD/JPY looks set to re-test recent high of 112.80 and could extend gains further towards 113. 30 (200-week MA) if Fed’s Powell downplays the impact of trade tensions on the economy.”

“Further gains are ruled out, for now, courtesy of short-term overbought conditions. On the other hand, USD/JPY risks falling back to its 10-day MA, currently located at 111.51, if Powell sounds more cautious as regards further rate hikes,” he adds further.