USD/JPY back near daily lows after short-lived recovery

The recovery of the US dollar against the Japanese yen was short-lived and USD/JPY is back under pressure, trading around the 112.50 area. 

The pair bottomed earlier at 112.05 and then rose more than a hundred pips from the low, reaching 113.33. Despite the sharp recovery, USD/JPY was unable to hold above 113.00 and currently is hovering around 112.50, headed toward the lowest daily close in two months. 

Month end flows and President Trump speaking about currency devaluations, triggered price action moves on Tuesday. Late on Tuesday, Trump will announce the nominee for the Supreme Court. Tomorrow, investors will watch closely the statement of the FOMC. No change in interest rates, from the Federal Reserve, is expected. 

The yen today was among the best performers supported by risk aversion. In Wall Street, the Dow Jones was falling 0.83% while the S&P 500 was down 0.47%. European stock indexes ended lower. The DAX lost 1.25% while the FTSE 100 declined 0.27%. 

Technical outlook 

“The USD/JPY pair bounced from 112.05, after flirting with the 38.2% retracement of the post-US election rally, but so far remains unable to extend beyond the 113.00 level, overall poised to extend its slide”, said Valeria Bednarik, Chief Analyst at FXStreet. 

According to her technical readings in the 4-hour chart support the bearish case, “given that the price is now well below a bearish 100 SMA, whilst technical indicators have barely bounced from oversold readings, rather reflecting the latest bounce than suggesting downward exhaustion.”