USD/JPY pushes higher toward mid-111s on positive market sentiment

After starting the day with a 30-pip bullish gap, the USD/JPY pair extended its gains above the 111 handle and is now trading at 111.40, adding 0.5% on the day.

Despite a relatively subdued trading action on Monday, the pair is receiving a boost from the improved market sentiment, which undermines the demand for traditional safe-havens such as the JPY. The Nikkei 225 Index closed the day 0.5% higher and the risk appetite carried over to the European session with the German Dax 30 and UK's FTSE 100 gaining 0.25% and 0.45% respectively at the moment. The upbeat tone surrounding major global equity indexes is likely to help Wall Street start the day on a high note, which could support the pair upsurge during the second half of the day.

Moreover, the economic calendar is virtually empty on Monday, allowing the market sentiment to drive the price action.

On the other hand, the US Dollar Index, which rose toward the 92 handle in the early European session, seems to have lost its momentum, but it's still holding onto small gains at 91.70. The 10-year Treasury-bond yield in the U.S. is up 0.4% and is helping the greenback stay in the positive area for now.

Technical outlook

The pair faces the first critical hurdle at 111.50 (200-DMA). A daily close above that level could open the door for further gains towards 112 (psychological level) and 112.85 (Jul. 17 high). On the other hand, a failed attempt to rise above the 200-DMA could trigger a correction fall, which could find support at 110.80 (100-DMA), 110 (psychological level/50-DMA) and 109.50 (Sep. 14 low).