USD/JPY touches 112 for the first time since Jan. as DXY rallies to mid-94s

• US Dollar Index advances to weekly highs above 94.
• Annual core-PPI in the U.S. rises to 2.8% in June. 

The USD/JPY pair is staging a robust rally in the NA session despite the weak risk appetite, which generally increases the demand for traditional safe-havens such as the JPY. As of writing, the pair was trading a couple of pips below 112, where it refreshed its highest level since January, and was up 0.9%, or around 100 pips on the day.

Today's data from the United States showed that the core-PPI jumped to 2.8% on a yearly basis in June from 2.4% in May and surpassed the market expectation of 2.6%. It seems like this data triggered a broad-based USD buying as investors started pricing the expectations of a strong CPI reading tomorrow. Experts estimate the annual core-CPI to edge higher to 2.3% in June from 2.2% in May.

After failing to make a decisive advance about the 94 mark in the past two days, the US Dollar Index gained traction and rose to a fresh weekly high at 94.46. At the moment, the index is up 0.6% on the day at 94.40. 

Meanwhile, major equity indexes in the United States started the day on a weak note with the Dow Jones Industrial Average and the S&P 500 both losing around 0.75% as of writing. Moreover, reflecting the negative sentiment, the 10-year T-bond yield is down 0.65% on the day. A pause in the DXY's rally could trigger a correction in the USD/JPY pair if the risk-off mood starts to dominate the price action.

Technical levels to consider

With a daily close above 112 (psychological level), the pair could extend its upside toward 112.75 (Jan. 10 high) and 113.40 (Jan. 8 high). On the downside, supports align at 110.50 (20-DMA), 110 (psychological level) and 109.50 (200-DMA). Meanwhile, the RSI indicator on the daily chart recently touched the 70 mark, suggesting that there could be a technical correction before the next leg up.