USD/JPY bounces back to 109.00 handle

Having dropped closer to weekly low, the USD/JPY pair caught some fresh bid and might now be looking to build on its momentum beyond the 109.00 handle. 

The pair extended overnight sharp reversal from just ahead of the key 110.00 psychological mark, triggered by a fresh round of selloff in the US equity markets, and dropped to mid-108.00s during the Asian session on Friday.

A second US government shutdown prompted some early US Dollar selling and was seen weighing on the major. The pair, however, once again managed to find some fresh buying interest and was being supported by the latest news that a legislation to keep the US government operating, increase spending through 2019, has cleared a procedural hurdle in Senate.

Omkar Godbole, Analyst and Editor at FXStreet writes: “The area below 108.50 has once again acted as indicated the move higher from 108.50 to 109.00 in Asia. As long as the support holds, the odds of the pair rising towards 110.00-110.48 will remain high.”

Meanwhile, the up-move seemed lacking any strong follow-through traction amid deteriorating investors' appetite for riskier assets, which was seen underpinning the Japanese Yen's safe-haven appeal and might continue to keep a lid on any meaningful up-move, at least for the time being.

Technical outlook

Omkar notes: “The immediate bullish outlook has been neutralized, but the spot is still holding above the support zone of 108.00-108.50 and a move above 109.30 (4-hour 50-MA) would open up upside towards 110.00 - 110.48 (Feb. 2 high).”

“Meanwhile, a weekly close below (closes today) below 108.00 (long-term ascending trendline support) would revive the bearish view and open doors for 106.64 (38.2% Fib R of 2011 low - 2015 high)” he further adds.