USD/JPY rebounds from multi-week lows, looking to extend the recovery beyond 110.00 mark
| • Initial signs of stability in the financial markets prompted some short-covering.
• Fears of slowing global growth might keep a lid on any meaningful up-move.
Having refreshed multi-week lows, the USD/JPY pair witnessed a modest rebound and is now looking to build on the momentum further beyond the key 110.00 psychological mark.
The pair extended last week's post-FOMC downfall and remained under some heavy selling pressure on Friday, weighed down heavily by reviving safe-haven demand amid growing fears of slowing global growth.
A closely-watched indicator for recession - inversion of the US Treasury bond yield curve, appeared following another round of disappointing Euro-zone economic data and triggered a fresh wave of global risk-aversion trade.
The same was evident from a sharp fall in the US equity markets, which provided a strong boost to the Japanese Yen's relative safe-haven status and dragged the pair below the 110.00 handle for the first time since mid-February.
With investors still digesting the latest indicators of an economic recession, some initial signs of stability in the global financial markets extended some support, rather prompted some short-covering on Monday.
The uptick, however, lacked any strong bullish conviction and remained capped on the back of a subdued US Dollar price action as traders still await fresh developments in the US-China trade negotiations.
In absence of any major market moving economic releases, the broader market risk sentiment and the USD price dynamics might continue to act as key determinants of the pair's momentum on the first day of a new trading week.
Technical outlook
Omkar Godbole, FXStreet's own Analyst and Editor explained: “The relative strength index (RSI), however, is now reporting oversold conditions. So, the pair could consolidate around 110.00 for a few hours or may witness a minor bounce to 110.20 before extending the drop toward 109.50.”
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