USD/JPY recovers back above 106.00, but remains weak

The USD/JPY pair remained well offered but has managed to stage a minor recovery from a fresh six-week low level of 105.74 to currently trade just above 106.00 handle.

The Japanese Yen continues to surge on safe-haven demand after the Chinese economic data over the weekend showed a sharp decline in the Foreign Direct Investment during the month of May. Moreover, Yen is also gaining support from the weekend’s bombings in Orlando by the terrorist group ISIS and jittery global financial markets. Meanwhile, lingering fears about next week's UK-EU referendum seems to drive investors further towards the traditional safety of the Japanese currency.

Investors now turn their focus towards this week's key central bank monetary policy decisions, especially from the US Fed and the BoJ, which would determine the near-term trajectory for the pair.

From a technical perspective, weakness below May lows might now trigger a fresh bout of selling pressure and thus open room for further near-term depreciating move for the pair.

Technical levels to watch

From current levels multi-month low level of 105.55, touched in May, would be closely watched, below which the pair is likely to turn vulnerable and immediately slide to 105.00 handle before heading towards testing 104.00 round figure mark support. 

On the flip side, recovery momentum above 106.00 mark now seems to confront immediate resistance near 106.55-60 area. This is closely followed by a strong resistance near session peak level, around 107.00 handle. This 107.00 resistance might cap any near-term recovery for the pair and only a decisively strength above this strong resistance might negate the near-term bearish outlook for the pair.