USD/JPY is extending the upside in Tokyo, buy stops in play

• USD/JPY has been better bid at in September as risk sours but the dollar picks up the safe haven demand.
• The short-term picture for the pair is mildly positive.

Despite a drop in the Nikkei, USD/JPY is extending the upside in Tokyo, trading through the 111.60 level as the yen sells off marginally across the board, probably with a buy stops being triggered. 

USD/JPY has been creeping its way up since the close of last month as the dollar takes back its safe haven role due to ongoing trade disputes between the US and China and slow progress with NAFTA. The ISM data has also served the bulls pips on a silver platter as the curve steepens and projections for Fed rate hikes pick up in 2019, leaving the pack behind. 

The ISM manufacturing index rose to 61.3 in August, above expectations (Consensus: 57.6), from 58.1 in July. 

"Despite trade uncertainties, the ISM index reached the highest level since May 2004 and points to continued strong activity with broad-based gains in subindices. That said, respondent comments suggest concerns over trade policies remain acute. The expected escalation in trade tensions with China has the potential to weigh on business sentiment,

analysts at Nomura explained.

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the short-term picture for the pair is mildly positive, as the current area is a major static resistance that the pair seems unable to surpass:

"Nevertheless, it has advanced above its 100 and 200 SMA in the 4 hours chart, while technical indicators hold near daily highs well into positive territory. At this point, the pair would need to not only surpass the current region but also 111.82, the high from last week to offer a more constructive technical outlook. "