USD/JPY: No response to dismal Japan PMI, 5-day MA capping downside

• Japan's manufacturing activity contracted in February for the first time since 2016. The pair has barely moved in response to dismal data. 
• The bullish 5-day moving average (MA) capped downside earlier today. 

USD/JPY is currently trading in the red at 110.73, having hit a high and low of 110.86 and 110.59 earlier today. 

Japan's manufacturing activity contracted in February for the first time since 2016, courtesy of shrinking domestic and export orders, the Flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) released earlier today showed. 

The index fell to 48.5 from a final 50.3 in January. The reading below 50 indicates contraction. 

That said, the contraction in the manufacturing activity only validates BOJ's view that policy needs to stay accommodative. So far, however, the dismal data has not had any impact on JPY pairs, possibly because treasury yields dropped in the overnight trade after the Fed minutes revealed there was a widespread agreement for the central bank to end the balance sheet normalization program by the end of the year. 

Looking ahead, the yen may come under pressure if the equities pick up a strong bid. As of writing, the S&P 500 futures are flatlined, while the major Asian indices are trading mixed. 

Technical speaking, the immediate outlook remains bullish, as both the 5- and 10-day MAs are trending north. More importantly, the pair found support near the 5-day MA of 110.65. 

Technical Levels