USD/JPY sits at session tops, above 111.00 handle ahead of ADP report

The USD/JPY pair continued gaining traction through mid-European session and built on its momentum beyond the 111.00 handle.

Currently trading around 111.20 region, testing session tops, strong up-move in the US treasury bond yields underpinned the US Dollar demand and has been a key factor driving the pair's strong recovery move two-week lows touched in the previous session.

   •  USD: Feeble attempt to form a base between 96.8-97.8 - Westpac

Meanwhile, a slight improvement in investors' appetite for riskier assets - like equities, despite of today's downbeat Chinese manufacturing PMI print, further weighed on the Japanese Yen's safe-haven appeal and collaborated to the strong bid tone surrounding the major.

The pair is now heading towards the top end of weekly trading range as focus shifts to today's US economic docket, featuring the release of ADP report, weekly jobless claims and ISM manufacturing PMI. Today's labor market reports would build expectations for Friday's official job numbers (NFP), which is likely to act as the next big trigger for the pair's near-term trajectory.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: "Rejection at 113.99 (23.6% Fib R of 2011 low - 2015 high) and a falling tops since the beginning of the year suggests the spot is likely to test 110.23 (monthly 50-MA) and 110.08 (200-DMA). The monthly 50-MA is sloping upwards; hence caution is advised once the spot is at or below 110.00 levels. On the higher side, only a daily close above 112.13 (May 24 high) would revive the short-term bullish view."