USD/JPY recovers daily losses, turns flat above 113

After dropping to 112.75 in the early European session, the USD/JPY started to recover its daily losses and moved above the 113 handle as the greenback gathered momentum. As of writing, the pair is trading a few pips below its session high of 113.30 and is virtually flat on the day.

Earlier in the day, news from North Korea claiming that the country successfully tested an intercontinental ballistic missile coupled with a weak start to the day by the major European equity indexes hurt the overall market sentiment and increased the demand for safe havens, allowing the JPY to erase its losses against the USD from yesterday. However, the pair's drop couldn't accelerate as the demand for the greenback remained solid, pushing the US Dollar Index back above the 96 mark. At the moment, the DXY is at 96.05, up 0.1% on the day.

• Russian military: North Korean missile was intermediate-range - RIA

For the remainder of the day, the pair is likely to remain in a tight range near its opening level as American traders will be enjoying their July 4th holiday. In the early hours of the Asian session, Markit Services PMI will be released from Japan.

Technical outlook

Despite today's retreat, the pair is comfortably sitting above the critical 200-DMA, The last time the pair made a clean break above the 200-DMA in mid-April, it extended the uptrend for nearly 300 more pips. The initial hurdle for the pair aligns at 113.85 (May 15 high) ahead of 114.35 (May 10 high) and 115 (psychological level). On the downside, supports could be seen at 113 (psychological level), 112.55 (200-DMA) and 111.55 (50-DMA).

• USD/JPY next resistance at 114.35 – UOB