USD/JPY surges to 4-week high after upbeat US Services PMI

The USD/JPY pair quickly faded disappointing ADP report-led slide below 103.00 handle and has now jumped to a four-week high level of 103.45 after surprisingly stronger US services PMI.

The Institute of Supply Management's (ISM) non-manufacturing PMI for September climbed to 57.1, surpassing even the most optimistic forecast and far stronger than 51.4 recorded in the previous month. Immediately after the release, the pair surged to 103.50, the highest level since September 6 and took a step forward towards 100-day SMA resistance. 

During early NA session, disappointment from ADP report for September and August US trade deficit numbers dragged the pair below 103.00 handle. The pair, however, quickly recovered amid bouyant US equity markets, which drove investors away from the perceived safety of the Japanese Yen.

Going forward, the pair's near-term trajectory would now be dependent on the upcoming release of US monthly jobs report on Friday, which would influence the Fed's monetary policy outlook and eventually drive the greenback in the near-term.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "the 1 hour chart shows that the price remains far above its moving averages, but that the momentum indicator diverges lower, posting lower highs and aiming to enter negative territory, while the RSI indicator retreated from overbought levels and heads south around 56, not enough to confirm a stronger decline. In the 4 hours chart, technical indicators are turning south within overbought territory, also indicating some short term upward exhaustion. Below 102.60 the pair could correct lower and approach the 102.00 figure, particularly if upcoming US data beats expectations."

"Support levels: 102.60 102.20 101.65
Resistance levels: 103.15 103.45 103.80"