USD/JPY: trapped on the 112 handle, N.Korea / option expiries weighing below key 112.99 fibo

Currently, USD/JPY is trading at 112.69, up 0.04% on the day, having posted a daily high at 112.76 and low at 112.32.

USD/JPY has continued to struggle on advances through the 113 handle and the 112.99 fibo, ( 61.8% retrace of the 118.66 to 107.32 fall). Friday's high was 113.43 before the N.Korea news released within Russian headlines, sending markets into risk-off mode. 

For the start of the week, a recovery in the pound pulled GBP/JPY higher and USD/JPY subsequently rallied to 112.85 in early Asia. However, large options expiries are sighted for this week between 112 and 113, potentially weighing on bull's commitments.

On a monthly outlook, analysts at Scotiabank explained that the JPY will underperform broadly in the coming year:

"Domestic growth trends remain weak and the BoJ remains far from achieving its 2% inflation goal. This means policy accommodation remaining in place for an extended period as other central banks prepare to exit extra-ordinary accommodation or nudge policy tighter. Relatively weaker growth and accommodative monetary policy settings will weigh on the JPY. We expect the USD to trade up to the 120 area through late-2019 but longer-term charts suggest a risk of more rapid USD appreciation in the medium term if the USD pushes through the 115 area on a sustained basis in the next couple of quarters."

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the pair presents a neutral-to-bullish stance in the short term, given that in the 4 hours chart, the pair held above a bullish 20 SMA, while technical indicators aim modestly higher around their mid-lines, lacking directional momentum but anyway entering positive territory. "Chances of stronger directional movements are quite limited, yet a break above 113.00 should see the pair retesting its recent highs, at 113.43. The mentioned 100 SMA converges with the daily low at 112.30, reinforcing the support. A break below the level should lead to a test of 112.00, a major Fibonacci support and a probable bottom for this Monday." 

• Immediate support between recent 112.22/32 session lows - RTRS
• Decent support likely all the way down to 200-DMA @111.91 - RTRS