The USD/JPY pair has managed to recover majority of its early lost ground to sub-111.00 level but struggled to build on the recovery move and is currently placed around 111.20-25 region.
After the initial knee-jerk reaction to the tragic news of a suspected terrorist attack in the city of Manchester, improving investors’ risk-appetite, as depicted by strong gains in European equity markets, drove flows away from traditional safe-haven assets and helped the pair recover from lows.
The pair, however, lacked follow through momentum amid persistent selling interest surrounding the greenback. Rising political uncertainty in the US and fading expectations for faster Fed rate-tightening cycle continues to weigh on the buck, with the key US Dollar Index sinking to fresh six-month lows and failing to provide any additional boost to the pair.
Later during the day, second tier US macro data – new home sales, Richmond manufacturing index and flash manufacturing PMI, would now be looked upon for some short-term trading opportunities. Meanwhile, market focus would remain glued to Wednesday’s key Fed monetary policy meeting minutes, which would provide clues over the central bank’s near-term monetary policy outlook and eventually provide fresh impetus for the pair’s next leg of directional move.
Omkar Godbole, Analyst and Editor at FXStreet writes: “The rejection at 113.99 (23.6% of 2011 low – 2015 high) earlier this month, followed by a drop to 111.00 levels despite last month’s long-legged Doji candle is disheartening for the USD bulls. The retreat from 113.99 has also kept the falling top formation intact. Thus, the spot could re-test 110.00 levels in the short-run. Two consecutive daily close below 110.00 would open doors for a sell-off to 108.13 (recent low). On a larger scheme of things, only a break above 116.50 (descending trend line hurdle) would revive the bullish view.”