USD/JPY pare losses, recovers to 110.60 level
The USD/JPY pair pared some of its early losses to session low near 110.25 region and managed to recovery around 40-pips to currently trade around 110.60-65 band.
A larger-than-expected drop in the US trade deficit provided a minor up-lift to the US treasury bond yields and extended some support to the greenback. In fact, the key US Dollar Index held on to its daily gains beyond mid-100.00s and supported the pair's recovery from closer to over 4-month lows touched last week.
However, the prevalent cautious environment around global equity markets remained supportive for traditional safe-haven assets and capped further recovery, with the keep maintaining its bearish bias for the third consecutive session.
It, however, remains to be seen if the pair is able to extend the recovery move further beyond the 110.70 immediate hurdle or the bounce is being utilized to initiate fresh short-positions ahead of the US President Donald Trump's meeting with Chinese President Xi Jinping later this week.
Today's speech by the ECB President Mario Draghi would also be looked upon and might infuse some fresh bout of volatility in the financial markets, which could eventually provide some fresh impetus for short-term traders.
• Mario Draghi’s speech – New €50 banknote - Live Coverage
Technical outlook
Valeria Bednarik, Chief Analyst at FXStreet writes, "in the 1 hour chart, the pair remains well below its moving averages, whilst technical indicators have barely bounced from oversold readings, far from suggesting further recoveries ahead. In the 4 hours chart, however, the bearish momentum remains strong, as technical indicators have resumed their declines after a modest upward correction from oversold levels, whist the 100 SMA extended its decline above the current level, now converging with a major Fibonacci resistance at 112.00. The pair has a major support at 109.90, the 50% retracement of the late 2016 rally, with a break below it probably triggering a sell-off in the pair."