The USD/JPY pair stalled its up-move to one-week high and has now surrendered majority of daily gains to session tops near the 112.00 handle.
Following yesterday's sharp recovery of around 100-pips from sub-111.00 level, the pair now seems to have entered a bullish consolidation phase as investors now look forward to the FOMC meeting minutes to reaffirm June Fed rate-hike expectations.
Given the recent data disappointment from the US market participants would keenly scrutinize the minutes to see if the Federal Reserve refrains from adopting aggressive rate-tightening cycle, which might eventually weigh on the greenback and trigger a fresh bout of weakness for the major.
Meanwhile, the pair's latest leg of retracement from higher levels could be attributed to a modest retracement in the US treasury bond yields, which failed to assist the US Dollar to build on overnight strong recovery gains. Despite of the pull-back, the pair has managed to hold with minor gains around 111.85 region amid improving investors' risk-appetite, as depicted by positive sentiment surrounding equity markets and which tends to weigh on the Japanese Yen's safe-haven appeal.
• Market wrap: US dollar stabilised - Westpac
Ahead of the Fed minutes, traders would confront the release of existing home sales data from the US that would be looked upon for some short-term trading impetus.
Technical levels to watch
Immediate resistance remains at the 112.00 handle, above which the pair is likely to build on its recovery move and head towards testing 112.40 resistance area ahead of the next major hurdle near 112.70 region. On the flip side, 111.50-45 zone now seem to protect immediate downside, which if broken would turn the pair vulnerable to dip back below the 111.00 handle and retest 110.85-80 strong horizontal support.
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