USD/JPY extends a tepid recovery to 104.75 after US releases

The USD/JPY pair is seen extending its recovery from a two-week low level near 104.00 region and is now trading around 104.75 region.

The pair's recovery momentum gained traction after the Conference Board Consumer Confidence Index printed better-than-expected reading for the month of July and stood at 97.3, slightly lower than 97.4 recorded in June. 

Meanwhile, the new home sales data also posted a healthy gain of 3.5% in June and rose to a seasonally adjusted annual rate of 592,000 units, marking its strongest reading since February 2008. The reading surpassed even the most optimistic estimates and provided the much needed respite for the USD/JPY bulls. 

Earlier on Tuesday, the pair got slammed as market participants got disappointed on news of much lower than anticipated stimulus package from the Japanese government. 

Going forward, traders would now take near-term bets following the passage of this week's key event risks, monetary policy decisions from the US Federal Reserve on Wednesday and the Bank of Japan on Friday.

Trade July 27 Federal Reserve interest rate decision - Live Coverage

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "The short term picture for the pair supports a  limited upward correction, as the technical indicators  in the 1 hour chart are recovering from extreme oversold readings, but the price is now well below its 100 and 200 SMA, with the shortest gaining bearish strength above the largest. In the 4 hours chart, the Momentum indicator keeps heading south within bearish territory, while the RSI indicator turned flat around 28, maintaining the risk towards the downside, particularly on a break below 104.00. Upcoming direction will depend on Wall Street, as if US stocks fall, the pair can extend its decline down to 103.60."

"Support levels:  104.00 103.60 103.20
Resistance levels: 104.80 105.30 105.70"