USD/JPY sees a sharp reversal, drops back to 105.50

The ongoing upward rally in the USD/JPY pair suddenly lost legs near 106.30, knocking-off the rate almost 80-pips lower towards the mid-point of 105.50 in early Europe.

USD/JPY back below 106 handle

The dollar-yen failed to sustain at higher levels and subsequently witnessed a sharp reversal from multi-week tops amid a drastic turnaround in risk sentiment as the Asian indices pared gains. At the time of writing the USD/JPY pair is seen around 105.70, having pull-backed from a dip to 105.43 in the last hour, recording a +0.30% gain so far this session.

Focus now remains on the overall risk sentiment as we progress towards the European session, while the sharp retreat can be also justified by a fresh profit-taking spree, after the major hit a three-week high.

Markets moved past the Chinese data-dump, and now turn their attention towards the NA session, with plenty of risk events on the cards.

USD/JPY Technical levels to watch

In terms of technicals , the immediate resistance is located at 106.50 (Multi-week highs). A break above the last, the major could test 106.85 (post-Brexit high). While to the downside, the immediate support is seen at 105.40 (static support) and below that at 105.09 (daily pivot).