USD/JPY bounces off lows, still weaker below 109.00 handle

A fresh wave of global risk aversion trade lifted the Japanese Yen across the board, with the USD/JPY pair dropping sharply to hit a four-month low level of 108.33. The pair, however, has managed to bounce off lows and might now be looking to recover back above the 109.00 handle.

Escalating geopolitical tension in the Korean peninsula, after North Korea fired a missile early on Tuesday, was seen driving global flows towards traditional safe-haven assets. The same is being reinforced by a slump in the US Treasury bond yields and has been one of the key factors weighing on the major. 

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Adding to this, concerns over the economic implications of Hurricane Harvey added to the already weaker sentiment surrounding the US Dollar and further collaborated to the pair's fall to the lowest level since April 18.

The pair's recovery from lower levels lacked any fresh fundamental catalyst and could be solely attributed to some short covering from closer to yearly lows support, thus runs the risk of fizzling out at higher levels. 

Later during the NA session, the release of Conference Board's Consumer Confidence Index would now be looked upon for some short-term trading impetus ahead of this week's important US macro data, including the keenly watched NFP release on Friday.

Technical levels to watch

Recovery move above the 109.00 handle is likely to confront some fresh supply near 109.30 level, above which a bout of short-covering could lift the pair back towards 109.85 heavy supply zone. On the downside, the pair remains vulnerable to drop towards yearly lows support near the 108.15-10 region, which if broken should pave way for continuation of the near-term bearish trajectory towards testing sub-107.00 level in the near-term.