USD/JPY bulls struggling to defend 113.00 handle

Having posted a session high near mid-113.00s, the USD/JPY pair ran through some fresh offers and turned lower for the third consecutive day.

The Fed Chair Janet Yellen's semiannual testimony lacked any hawkish surprise and the same was being reaffirmed by plunging US Treasury bond yields. This coupled with her remarks that the Fed Funds rate wouldn't need to rise much to reach a neutral policy stance continued weighing on the US Dollar through Asian session on Thursday.

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With Asian equity markets trimming part of early strong gains, despite upbeat Chinese trade balance data, a modest pickup in the safe-haven demand provided an additional boost to the Japanese Yen and failed to assist the pair to build on early up-move. 

The pair slipped below the 113.00 handle to fresh one-week lows, albeit has managed to hold above 112.75-70 horizontal support as traders now look forward to the US economic data - weekly jobless claims and PPI print, for some fresh impetus. 

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: "The corrective pullback could be extended to 112.60 (4-hour 100-MA) - 112.32 (38.2% Fib) as the RSI is bearish and treasury yields are showing no signs of life. However, 10-DMA is still sloping upwards plus one-month ATM option volatility has eased to 7.76 from the current month high of 8.425. Thus, dip demand cannot be ruled out; although only an end of the day close above 10-DMA would confirm the pullback has ended."

"A deeper correction to sub-111.00 levels could be seen if the ATM volatility gathers pace, while one-month 25 delta risk reversal slides further" he added.