USD/JPY surrenders early gains to over 1-month tops, retreats farther below 114.00 mark

   •  The USD pauses after rising to over 17-month tops and prompt some profit-taking.
   •  Risk-off mood underpins JPY’s safe-haven status and collaborates to the intraday slide.

The USD/JPY pair extended its retracement slide from fresh one-month tops and dropped to fresh session low during the early North-American session. 

The pair regained positive traction at the start of a new trading week and build on its positive momentum further beyond the 114.00 handle on the back of a strong follow-through US Dollar upsurge. With the USD bulls taking some breather near 17-month lows, the pair started correcting from fresh one-month tops and has now retreated nearly 50-pips from an intraday high level of 114.21.

A combination of factors - US-China trade tensions, Brexit uncertainty and Italian budgetary concerns, dented investors’ appetite for the riskier asset. The risk-off mood was evident from the prevalent bearish tone around equity markets, which was seen underpinning the Japanese Yen's safe-haven appeal and eventually turned out to be one of the key factors prompting some profit-taking at higher levels. 

The downside, however, remained cushioned amid firming expectations for a gradual Fed monetary policy tightening cycle, even beyond 2018, and hence, it would be prudent to wait for a follow-through selling before confirming that the pair might have topped out in the near-term.

Technical outlook

Valeria Bednarik, FXStreet's own American Chief Analyst explains: “The 4 hours chart shows that the pair continues trading well above it's 100 and 200 SMA, with both gaining ground just modestly, some 100 pips below the current level. Technical indicators in the mentioned chart ease within positive levels, the Momentum at fresh daily lows and the RSI barely easing from overbought territory, this last limiting the downside potential.”

“Bulls and bears are now battling for dominance. Should the pair lose the 113.85, the immediate support, bears will take control and the pair could extend its retracement then, down to 113.40. Above the mentioned high, on the other hand, the pair has room to extend its advance up to 114.54, the October monthly high,” she added further.