USD/JPY bounces off multi-month lows, spikes to fresh session peak

Having posted a fresh multi-month lows at 109.35 level, the USD/JPY pair staged a goodish recovery and spike to fresh session tops near 109.75 region. 

With the European equity indices opening on a positive note, a slight improvement in investor's appetite for riskier assets was seen moving flows away from traditional safe-haven assets, including the Japanese Yen. This coupled with today's disappointing release of Japanese Core Machinery Orders was also seen weighing on the Japanese Yen. 

Meanwhile, a modest recovery in the US treasury bond yields, especially for the shorter maturity (2-yr), further collaborated to the pair's recovery from the lowest level since Nov. 17. However, softer sentiment surrounding the key US Dollar Index, in wake of a possible US military action against Syria and North Korea, might capped any further recovery.

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With the only scheduled release of import / export price index, the US economic docket lacks any major market moving economic releases and hence, broader market risk sentiment, and bond yield dynamics, would continue to be key drivers for the pair's movement on Wednesday.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet wites, "Pair’s break below and a daily close below 110.00 levels followed by a breach of the monthly 50-MA level of 109.59 has opened doors for a sell-off to the 200-DMA level of 108.54 and 108.30 - support offered by the falling channel/flag floor. The daily RSI is close to being oversold, but still above 30.00, indicating a scope for another 100-pips drop in the pair. The daily MACD shows the bearish move is gathering pace again."

"On the higher side, only a daily close above 110.00 levels would signal bearish invalidation" he added.