USD/JPY surrender recovery gains, retreats to 111.00 ahead of Yellen

Having failed to build on early recovery move beyond mid-111.00s, the USD/JPY pair ran through fresh offers and refreshed daily low. 

In absence of any fresh fundamental development, a mild greenback retracement, with the key US Dollar Index retreating back closer to multi-week lows near mid-99.00s, seems to be the only factor driving the pair lower.

USD/JPY: Buying dips and taking profit at 114.50 is the right way to go - Westpac

However, positive trading sentiment around European equity markets, and the ongoing recovery in the US treasury bond yields, helped limit further downslide. The pair was last seen hovering around the 111.00 handle, few pips off session low near 110.90 touched in the last hour.

Market attention on Thursday would remain glued to the key speech from the Fed Chair Janet Yellen and the crucial vote on the Republican healthcare bill to replace Obamacare, which would drive market expectations over Trump's ability to deliver on his pro-growth economic policies.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes, "a bearish break from the sideways expanding channel on Tuesday, followed by a daily close below the critical support of 111.60 and below the lower Bollinger band on Wednesday, coupled with the downward sloping 50-DMA suggests the doors have been opened for a sell-off to 110.00 levels. 

“The daily RSI is yet to hit the oversold territory, which supports the bearish case. Failure to hold above 111.14 (0.618% Fib extension level) would add further credence to the bearish view. Also worth noting is that the 50% Fib retracement of the Trump rally is located at 109.93 levels. The spot could revisit 111.60 - 112.00 levels if the health care bill is passed, however, the outlook remains bearish as long as the spot is below 112.60 (Jan 17 low)" he added.