USD/JPY: overnight sharp recovery remains capped at 110 mark

The USD/JPY pair struggled to build on overnight sharp recovery from over 4-months and remained capped below the key 110.00 psychological mark.

The pair on Tuesday witnessed a dramatic reversal and rebounded in excess of 160-pips from lows, touched in wake of global flight to safety on escalating geopolitical tensions in the Korean peninsula. A smart US Dollar recovery from over 2-1/2 year lows turned out to a key driver of the pair's sharp recovery during NY session. 

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The up-move, however, lacked any follow through momentum despite improving investors' risk appetite, which tends to weigh on the Japanese Yen's safe-haven appeal. Today's better-than-expected Japanese retail sales data seems to be the only factor capping the pair's up-move, at least for the time being.

Moreover, traders also seemed to wait on the sidelines ahead of today's important US economic data - ADP report on the US private sector employment and the first revision of US growth numbers, due later during the NA session. 

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Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: "The spot is likely to take out the trend line hurdle of 110.13 and extend recovery from yesterday’s low of 108.27 to 111.19 [50-DMA] levels. On the downside, only an end of the day close below 109.00 would signal bullish invalidation."