• USD fades hawkish Fed-led bullish spike and prompts some fresh selling.
• Reviving safe-haven demand benefits JPY and adds to the downward pressure.
• US retail sales eyed for some fresh impetus ahead of the BoJ decision on Friday.
The USD/JPY pair extended its overnight retracement slide from three-week tops and revisited the key 110.00 psychological mark in the last hour.
The pair on Wednesday did spike higher to an intraday high level of 110.85 after the Fed, as was widely expected, delivered a 25bps rate hike and signalled possibilities of two additional rate increases in 2018.
The euphoric reaction quickly ran out of steam on the back of a sharp US Dollar retracement, with bears further tracking the ongoing retracement slide in the US Treasury bond yields.
Adding to this, a slight deterioration in investors' appetite for riskier assets, as depicted by negative trading sentiment across equity markets, provided an additional boost to the Japanese Yen's safe-haven appeal and further collaborated to the pair's fall back below the very important 200-day SMA.
The bearish pressure seems to have abated a bit, at least for the time being, with bulls now showing some resilience below the 110.00 handle as traders look forward to the release of US monthly retail sales for some fresh impetus.
Apart from the US macro data, investors' will also focus on the Bank of Japan's latest monetary policy update, due to be announced during the Asian session on Friday, which should help determine the pair's next leg of directional move.
Technical outlook
Omkar Godbole, Analyst and Editor at FXStreet writes: “A bearish reversal would be confirmed if the spot closes below the 200-day MA of 110.19 today. In this case, the pair will likely resume the journey back to 108.81 (38.2 percent Fibonacci retracement of 104.63-111.40).”
“Only a daily close above 110.85 (previous day's high) would signal a short-term bull revival,” he added further.
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