USD/JPY keeps the red below 114.00 handle

The USD/JPY pair snapped three consecutive days of winning streak and traded with mild negative bias on Wednesday, albeit has managed to bounce off few pips from session low.

Currently trading around 113.80 region, the pair is being weighed down by a broad based US Dollar retracement, primarily led by retracing US treasury bond yields amid renewed worries over the Korean peninsula following reports that North Korea plans to proceed with its sixth nuclear test.

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The Japanese Yen also got a boost from Bank of Japan Governor Haruhiko Kuroda comments, during a parliamentary session on Wednesday that the central bank will begin considering an exit strategy from its current aggressive monetary easing. 

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Further downside, however, remained limited on the back of prevalent risk-on environment, as depicted by positive sentiment surrounding equity markets, which tends to dent the Japanese Yen's safe-haven appeal.

Meanwhile, growing market expectations that the Federal Reserve would eventually move towards raising its benchmark rate in June should continue to underpin the greenback demand and also collaborate towards restricting any sharp corrective slide, at least for the time being. 

With a relatively empty US economic docket, featuring the only release of export / import price index, the US bond yield dynamics should continue to be an exclusive driver of the pair’s price-action on Wednesday. 

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes : "The rebound from the weekly 50-MA followed by an upside break from the bull flag pattern coupled with the RSI above 50.00 suggests the spot is on track to test 115.00-115.50 levels. However, the daily RSI is now overbought. No wonder, the spot is struggling to take out key fib resistance at 113.99."

"A daily close above 113.99 would add credence to the bullish weekly chart and would open doors for 115.00 - 115.50 levels. The Accumulation-Distribution line is above zero and sloping upwards suggesting demand for the US dollar and further gains once the hurdle at 113.99 is taken out" he added.