USD/JPY: oversold bounce faltering despite sustained risk-on, Japanese wage growth betters estimates

USD/JPY's corrective bounce from recent lows below 105.00 is showing signs of exhaustion.

The currency pair created a doji candle yesterday, signaling indecision in the marketplace, despite the sustained risk-on action in the equity markets and an uptick in the treasury yields. For instance, the major US indices rallied for the third consecutive day on Tuesday and the US 10-year Treasury yield gained more than three basis points.

Notably, Asian equities are better bid at press time. Names like Nikkei, Kospi and ASX 200 are up 0.5 percent each. Still, the pair is struggling to pick up a strong bid, now trading largely unchanged on the day at 108.74.

A close today below 108.44 would confirm bearish doji reversal - end of the corrective bounce. That is more likely to happen, as the spread between the 10-year US and Japanese government bond yields has narrowed to levels last seen in April 2018.

Moreover, the Japanese yen could find takers during the day ahead, courtesy of the big beat on the wage growth figures. Japan's November labor cash earnings rose 2 percent year-on-year, beating the estimated print of 1.2 percent by a big margin. The regular pay increased by 1.6 percent year-on-year - the fastest pace since June 1997.

Further, the haven demand for the JPY will likely rise if the equities react negatively to Trump's "Border Wall Speech."

USD/JPY Technical Levels