USD/JPY recovers back above 113.50 level as USD sell-off abates

The USD/JPY pair has managed to recover around 50-pips from session low near 113.20 region as the greenback sell-off abates. 

In a relatively brief inaugural speech on Friday, the US President Donald Trump's protectionist rhetoric and lack of clarity over his plans for economic stimulus failed to reignite the US Dollar rally. Moreover, fading market expectations of any immediate stimulus from the new administration drove the US treasury bond yields sharply lower and weighed heavily on the greenback. 

Adding to this, bearish sentiment surrounding equity markets also benefitted the Japanese Yen's safe-haven appeal and collaborated to the pair's slide to three-day low level of 113.17. 

However, the US Dollar selling pressure seems to have stalled during European session and helped the pair recover some of its lost ground. Also supporting the pair’s recovery from lows is a minor rebound in the US treasury bond yields and key European equity indices. 

In absence of any major market moving releases, USD price dynamics and broader market risk sentiment would remain key determinant of the pair’s move on Monday.

Technical levels to watch

A follow through recovery is likely to confront resistance near 114.00 handle above which the pair seems all set to extend the momentum back towards 114.65 level, with 50-day SMA near 114.40 region acting as intermediate resistance.

On the downside, 113.20-15 region (session low) now becomes immediate support, which if broken is likely to accelerate the slide below 113.00 handle towards recent lows support near 112.60 area.