USD/JPY retreats from 2-week tops, slips below 110.50

The USD/JPY pair had a mildly negative reaction to the US economic data and was seen extending its slow retracement from 2-week tops. 

Currently trading marginally below mid-110.00s, the pair seemed losing its upside momentum in wake of a slight disappointment from the core PCE price index, indicating that inflation remains stubbornly below the Fed's 2% target. 

   •  Fed: Inflation headache intensifies as core PCE hits low - ING

In absence of any big positive surprise from today's data, traders seemed prompted to take some profits off the table following the pair's latest leg of strong up-move of nearly 250-pips from 4-month lows touched on Tuesday.

Despite the pullback, the pair has still managed to hold with minor gains amid prevalent risk-on environment, which weighed on the Japanese Yen's safe-haven appeal.

Today's US economic docket also features the release of Chicago PMI and pending home sales data, which is likely to be overshadowed by month end flows and repositioning trade ahead of Friday's NFP report.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet notes: "The 4 hours chart shows that the price is losing upward strength ahead of the US opening, as technical indicators are turning marginally lower from overbought readings, although the price remains above its 100 and 200 SMAs, with the largest being an immediate short-term support around 110.25."

"Below the level, the slide may extend, but the extends of such move will depend mostly on US stocks and yields, as if there are no big moves there, the pair will probably wait for the US NFP report to be released this Friday" she added.