USD/JPY jumps toward 132.00 following US data, ahead of FOMC minutes

• US Dollar recovers strength after US data.
• US ISM Manufacturing Index drops to 48.4 versus 48.5 of market consensus.
• USD/JPY jumps after the report; attention turns to FOMC minutes.

The USD/JPY jumped from below 131.00 to 131.90 hitting the highest level since December 30 following the release of the US ISM Manufacturing Index and ahead of the FOMC minutes. A sharp rebound in US yields weighed on the Japanese Yen.

Dollar trims losses

The DXY is falling by just 0.35% and trades at 104.30 after being under 104.00 hours ago. The rebound accelerated after the latest round of US economic data. On the contrary, the Yen weakened amid surging US bond yields. The US 10-year yield rose from six-day lows at 3.67% to 3.71%.

The ISM Manufacturing report showed that business activity in the manufacturing sector contracted for the second straight month in December. The main index declined to 48.4 from 49 in November and below the market consensus of 48.5. The employment index rose to 51.4 surpassing expectations. The Price Paid index declined from 43 to 39.4, another sign of a slowdown in inflation.

The Federal Reserve will release at 19:00 GMT the minutes of the latest FOMC meeting. The document will be scrutinized for signs about the future path of monetary policy. On Thursday the ADP employment report is due and on Friday, NFP.

USD/JPY looking at 132.00

The USD/JPY is breaking and holding above 131.30/50, a positive development for the bulls. The pair is now looking at 132.00. Above the next relevant barrier is seen at the 132.30 zone. A decline back under 131.00 should suggest that the bearish pressure is still intact suggesting the bullish correction is over. A consolidation below 130.00 is needed to clear the way to more losses.

Technical levels