USD/JPY recovers to turn flat around 111.00 mark

The USD/JPY pair has managed to recovery majority of its lost ground and is now attempting to build on to its recovery momentum back above 111.00 handle.

Currently hovering around 111.00 region, the pair's corrective slide to mid-110.00s, led by broad based greenback retracement, was bought into, which reaffirms the pair's well-established post-US presidential election strong bullish trend on rising expectations for a Fed interest-rate hike action and aggressive fiscal stimulus by President-elect Donald Trump's administration. 

Moreover, positive opening for US equity markets, with all major indices closer to record levels, was seen weighing on the Japanese Yen's safe-haven appeal and contributing to the pair's recovery from session low. 

From technical perspective, although the near-term up-trend remains intact, near-term overbought conditions warrant consolidation around current levels or a near-term corrective slide.

Technical outlook

Slobodan Drvenica, Information & Analysis Manager at Windsor Brokers Ltd., notes, "The sentiment remains firmly bullish and eyes immediate target at 111.36 (50% retracement of 123.74/98.98, Nov 2015 / June 2016 descend), followed by 112.12 (weekly cloud base).Daily indicators continue to head north, despite being deeply in overbought territory, signaling room for further upside."

He further adds, "On the other side, today’s trading was so far shaped in Doji and close in Doji candlestick would be seen as initial signal of steep ascend running out of steam. However, firmer signals of easing require reversal of daily RSI and Slow Stochastic from overbought zone and violation of 110.00/109.78 supports (psychological level/Friday’s low) to validate scenario."

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