USD/JPY corrects to 104.30 ahead of Chinese trade balance data

The USD/JPY bulls seem to take some breather on Wednesday after the pair surged nearly 450-pips in just two days to test 105.00 psychological mark on Tuesday. The pair witnessed a corrective move and dipped below 104.00 handle before retracing few pips to currently trade around 104.25-30 band.

Expectations of additional fiscal stimulus from Japanese government were the key trigger that drove the pair higher since the beginning of the week. Moreover, persistent improvement in global risk sentiment, which dented safe-haven appeal of the Japanese currency, sent Yen tumbling lower across the board. 

Investors, however, now seem to have turned cautious ahead of the key macro releases from world's second largest economy, China, that includes today's release of trade balance data and second quarter GDP data on Friday. Any additional signs of a slowdown in the economic activity would resurface concerns of a China-led global economic slowdown and drive investors back towards the traditional safe-haven assets - like the Japanese Yen. 

Technical levels to watch

On the downside, 104.00-103.80 zone, marking 23.6% Fibonacci retracement level of 99.99-104.98 sharp up-move, seems to act as immediate support, below which the pair seems to extend the corrective move towards 38.2% Fibonacci retracement level support around 103.00 round figure.

Meanwhile on the upside, 104.65 level now seems to provide some immediate resistance. This is followed by a strong resistance near 105.00 psychological mark, which if conquered seems to provide an additional boost that could lift the pair towards pre-Brexit highs resistance near 106.00-106.10 zone.