USD/JPY surrenders tepid recovery gains, drops back to 3-week lows

The USD/JPY pair failed to build on early recovery move and has now reversed all of its daily gains, currently trading in neutral territory to the 111.00 handle. 

After some initial signs of stability, a fresh wave of selling pressure in equity markets, with most major European indices trading with loss of anywhere between 0.6%-1.0% drove investors back towards perceived safe-haven assets. A flight to safety, further reinforced by retracing US treasury bond yields, boosted the Japanese Yen's demand and could be attributed to the pair's retracement from higher levels. 

Moreover, escalating political concerns from the US has kept a lid on the US Dollar's early rebound, with the pair breaking below 3-week lows important support near mid-110.00s and eventually building on to its recent slump still seems a distinct possibility. 

   •  USD: Under pressure from politics - Westpac

Today's US economic docket, featuring the release of weekly jobless claims and Philly Fed Manufacturing Index, is unlikely to provide an immediate respite for the US Dollar bulls, with broader market risk-sentiment continuing to act as an exclusive driver of the pair's momentum on Thursday.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: "The daily RSI has turned bearish, which suggests the upticks could be met with fresh offers. Nevertheless, the oversold nature of the 1-hour RSI and 4-hour RSI could yield a revisit to 111.60. Only a daily close above 111.60 would signal bullish invalidation."