Having ground its way to 119.91 during the Asian session, USD/JPY couldn't quite make it above the psychologically important 120.00 level as speculative accounts defended a variety of option barriers at that price. With no economic news from Japan to move the market,  the yen traded mainly on technical considerations but by midday Europe the 120.00 target was just too tempting to ignore for dealers looking to run stops and the pair ratcheted to within 2 points of hitting that level and as we got to print just took it out.  On the fundamental side, the better than expected growth in US GDP has emboldened dollar bulls to plow more capital into the trade.  With some players now projecting fed funds rates to reach 4.75% by early next year which would add another 75 basis points of profit to the carry trade the USD/JPY continues to look strong. 

The euro meanwhile floundered today as news of better than expected German unemployment numbers and anticipation of an ECB rate hike later in the day provided little support for the single currency.  German unemployment fell for a seventh month in eight with a drop in joblessness reaching 53,000 level against expectations of only a 20,000 fall. German unemployment rate improved to 11.5% from 11.6% the prior month. A mini-boom spurred by the expanding export sector has stimulated hiring demand from German companies, especially for temporary and part time workers. The news however had little effect on the EUR/USD pair as yesterday's  better than expected data on US GDP and lackluster PMI data from Germany and France may have offset any euro-positive developments. The ECB rate hike scheduled for later in the session has been priced in by market participants and traders will instead look to the ECB communiqué to gauge the potential for further rate hikes.

Boris Schlossberg is a Senior Currency Strategist at FXCM.