USD/JPY bounces off lows, retakes 109.00 handle

   •  USD remains under intense selling pressure.
   •  Oversold conditions prompt some short-covering move.

The USD/JPY pair extended its bearish slide for the third consecutive session and broke below the 109.00 handle to hit fresh multi-month lows.

The US Treasury Secretary Steven Mnuchin's remarks, saying a weak greenback is good for the US trade, raised prospects of a currency was and sparked a fresh wave of broad-based US Dollar sell-off on Wednesday. 

The selling pressure remained unabated through the Asian session on Thursday, with the pair failing to build on a modest Asian session rebound to mid-109.00s. 

Meanwhile, near-term oversold conditions now seemed to have prompted some short-covering at lower levels, especially after the pair's recent slump of nearly 250-pips post-BOJ announcement on Tuesday. 

As Omkar Godbole, Analyst and Editor at FXStreet writes: “The sell-off looks overdone considering the gap between the 10-day MA and price. Further, the RSI shows oversold conditions.”

Today's US economic docket, highlighting the release of new home sales data, is unlikely to be a major game changer and hence, the pair remains at the mercy of broader market sentiment surrounding the greenback. 

Technical outlook

Omkar further added: “The spot has hit a new low, but the RSI has diverged. A close above the descending trendline would confirm a bullish RSI divergence and open doors for a corrective rally to descending 1-hour 50-MA, currently seen at 109.85.”

“A violation at 108.72 would expose support at 108.29, but oversold conditions warrant caution. 1-hour 50-MA hurdle could be put to test following confirmation of bullish RSI divergence on 1-hour chart. Consolidation likely following a daily close above the 10-day MA (seen sloping downwards to 110.00 by Monday).”