USD/JPY nears mid-110.00s, overnight swing highs

   •  A strong follow-through USD buying helps recover early Asian session dip.
   •  Disappointing retail sales data further weigh on JPY and add fuel to the momentum.

The USD/JPY pair quickly reversed an Asian session dip to sub-110.00 level and is currently placed at fresh session tops, around the 110.35-40 region. 

Investors remained anxious amid uncertainties stemming out the recent trade rhetoric and the same was evident from a turbulent overnight session in the US equity markets. The spillover effect was felt across Asian equity markets, which continued benefitting the Japanese Yen's safe-haven appeal and exerted some initial downward pressure on the major.

The downtick, however, turned out to be short-lived and was being supported by a strong follow-through US Dollar buying interest, further supported by an uptick in the US Treasury bond yields. In fact, the DXY was now seen building on its momentum beyond the key 95.00 psychological mark and was seen as one of the key factors behind the pair's intraday rebound of around 40-pips. 

The up-move was further supported by weaker Japanese retail sales data for May, coming in to show a tepid growth of 0.6% as compared to a downwardly revised 1.5% rise in the previous month. 

It would now be interesting to see if bulls are able to maintain their dominant position and continue lifting the pair, further beyond mid-110.00s, as the primary focus remains on any fresh trade-related developments.

Today's US economic docket, highlighting the final Q1 GDP growth figures, will now be looked upon for some fresh impetus later during the early North-American session. In the meantime, broader market risk sentiment and the USD price dynamics might continue to act as key determinants of the pair's momentum. 

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes, “only a monthly close above the long-term falling trendline (drawn from August 2015 high and December 2015 high) would confirm a bearish-to-bullish trend change. Currently, the trend line resistance is located just above 111.00.”

“On the downside, a daily close below the confluence of rising trendline and 50-day MA of 109.73 would shift risk in favor of a drop to 108.81 (38.2 percent Fibonacci retracement of March 26 low - May 21 high),” he added further.

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