USD/JPY: ripe for a fading the drift, enroute to S2 113.20?

Currently, USD/JPY is trading at 113.39, up 0.14% on the day, having posted a daily high at 113.45 and low at 113.17.

USD/JPY has been a repetitive fade since its heavy supply at latest Fed highs of 114.94. The yen carried some idle capital dropping away from stocks on Wall Street and has lost the 114 handle with the DXY losing around 0.6%. Investors were disappointed with Trump's call to hold off making tax reforms until Obamacare is dealt with next month first of all. Meanwhile, the US data was positive, but that did not prevent the US 10yr treasury yields falling from 2.49% to 2.44%. 

US data picks - Westpac:

"Another encouraging round of US data was delivered, building on the strong set yesterday. Housing starts fell 2.6% in Jan but all of the fall is attributable to multiples, with single family housing starts rising 1.9%. Building permits gained 4.6% in Jan (vs 0.2% expected).  The Philly Fed survey was very strong at 43.3 (18.0 expected) which was the highest since early 1984. New orders rose 12pts to 38, although employment slipped 1.7pts to 11.1 and prices received fell 16.2pts to 10.6. That said, the headline Philly Fed is consistent with a very strong ISM, and combined with yesterday’s strong Empire survey, hints at a solid run of US PMIs for Feb."

The economy ain't anything without BoJ’s extraordinary policy settings - Rabobank:

"Although the economic outlook expressed by the BoJ has become more upbeat in recent months with domestic production and consumption having improved, there is little currently confidence that these improvement can sustain without the BoJ’s extraordinary policy settings.

Japan’s declining population is a significant impediment to growth in domestic demand and the protectionist threats from the new US administration are a threat to export growth.  This backdrop suggest that there is a strong risk that talk of tapering from the BoJ is likely to emerge well before the real economy is ready to stomach a tightening in monetary conditions."  

USD/JPY levels

The analysts at Rabobank went on to explain that they expect USD/JPY to trade mostly in the 113 to 115 region this year.  "However, a significant step up of BoJ tapering fears will likely open up downside potential." For today, with spot currently below S1, on the hourly chart the 200 smoothed sma is noted at 113.46 that offers some resistance to the bid and a potential area of further fading on the way down in suit of the current trend to 112.80. On the flip side, 114.00, 114.20/50 is a congested territory. 

USD/JPY below S1