USD/JPY hangs near 3-week lows despite upbeat Empire Fed manufacturing survey

The USD/JPY pair reversed an early dip to fresh 3-week lows and might now be aiming to recover back above the 112.00 handle. 

The pair caught some fresh bids after data released from the US showed Empire state manufacturing index jumped to 30.2 in September. The reading surpassed even the most optimistic estimates and provided a minor boost to the US Dollar. 

Earlier today, the pair failed to build on early recovery move beyond the 112.00 handle amid some renewed safe-haven demand. The latest political uncertainty in the Euro-zone was seen lending support to the Japanese Yen's safe-haven appeal and capped the pair's early rebound.

The pair subsequently dropped to fresh three-week lows touched during early European session on Monday. However, a modest uptick in the US Treasury bond yields, accompanied with better-than-expected Empire State Manufacturing Index helped the pair to recover around 20 pips from session lows.

With the only scheduled US economic data out of the way, the pair remains at the mercy of broader market risk sentiment and the US bond yield dynamics. 

Technical outlook

"A rounding top pattern coupled with a failure to hold above 112.00 this Monday morning and a drop below the 200-DMA indicates the spot is likely to test demand around the 100-DMA located at 111.13. On the higher side, only an end of the day close above 113.00 would signal the continuation of the rally from the low of 107.32" writes Omkar Godbole, Editor and Analyst at FXStreet.