USD/JPY slides below 112.00 handle, hits fresh monthly lows

A fresh wave of greenback selling interest emerged during early NA session, dragging the USD/JPY pair below the 112.00 handle to fresh monthly lows. 

Currently trading around the 111.90 region, the pair dropped to test an important confluence support comprising of 100-day and 200-day SMAs amid persistent US Dollar selling bias and the prevalent risk-off environment. 

Against the backdrop of recent US data disappointment and last week's perceived dovish testimony by the Fed Chair Janet Yellen, the greenback selling pressure picked up pace after Republican efforts to replace Obamacare collapsed late Monday. The failure raised fresh doubts about the US President Donald Trump’s ability to push through his pro-growth agenda and was seen weighing heavily on the buck. 

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Adding to this, a fresh wave of global risk aversion trade, as depicted by a sell-off in European and the US equity markets, supported the Japanese Yen's safe-haven appeal and further collaborated to the pair's fall to its lowest level since late June. 

With the latest news flow indicating that the Japanese central bank might pull back from its ultra loose monetary policy stance, the market focus would remain on the upcoming BoJ monetary policy decision, due to be announced during Asian session on Thursday.  

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Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet writes, "the USD/JPY pair seems poised to extend its slide as it finally broke below the 38.2% retracement of its latest bullish run and even completed a pullback to the level, around 112.30, before reaching fresh intraday lows. In the 4 hours chart, the price is also developing below its 100 SMA, while technical indicators consolidate near oversold territory, lacking directional strength but leaning the scale towards the downside. The 50% retracement of the same rally stands at 111.60, with a break below it probably resulting in a downward acceleration towards the 111.00 region."