USD/JPY recovery capped by 109.70, following US stocks

• USD/JPY up-move losses momentum. 
• Wall Street recovery stopped, still in positive territory. 

The recovery of USD/JPY from 1-week lows was capped below 109.70. The move to the upside lost strength as equity prices failed to extend the recovery. The pair is following US stock indexes with a high correlation. 

Dow Jones futures bottomed earlier today at 23,120 about the same time when USD/JPY hit 108.44, the lowest in a week. Equity prices trimmed losses and pushed the pair to the upside. 

The greenback peaked at 109.63 after the US opening bell and then pulled back as the recovery in the stock market lost momentum. As of writing, the Dow Jones was up 0.22% and USD/JPY was trading at 109.20, marginally above yesterday’s close. 

The next move is likely to be decided by the equity market. More gains in Wall Street could boost the pair to test daily highs, while if another sell-off takes place a test of January lows at 108.25 seems possible. 

USD/JPY Technical levels 

To the upside, immediate resistance is seen slightly above daily high at 109.75, followed by 110.05 and 110.25 (Feb 5 high). On the flip side, supports lie at 109.05 (20-hour moving average), 108.85 and 108.50.