• A fresh wave of global risk-aversion trade underpinned JPY’s safe-haven status.
• A modest USD retracement from 2-month tops added to the selling pressure.
• Initial signs of stability helped bounce off lows ahead of US durable goods orders.
The USD/JPY pair has managed to recover a major part of its early decline to over one-week lows and was now seen building on the momentum further beyond the 112.00 handle.
The pair extended this week's retracement slide from the vicinity of the 113.00 handle and kept losing ground for the third consecutive session. The spill-over effect of the overnight rout in the US equities to the Asian markets on Thursday was seen underpinning the Japanese Yen's safe-haven appeal and eventually weighing on the major.
Adding to this, a modest US Dollar retracement from over two-month tops, combined with a weaker tone around the US Treasury bond yields exerted some additional downward pressure and dragged the pair to an intraday low level of 111.82.
However, a calmer start for the US equity futures pointed to some stability in equity markets and helped ease the bearish pressure. The pair has now recovered around 30-35 pips from lows and is currently trading around the 112.15 region.
Apart from the broader market risk sentiment, today's important US macro data - durable goods orders and pending home sales data, will now be looked upon for some fresh impetus later during the early North-American session.
Technical levels to watch
A follow-through recovery beyond the 112.20 level is likely to get extended towards the 112.65-70 region, above which the pair is likely to make a fresh attempt towards reclaiming the 113.00 handle. On the flip side, the 111.80-75 zone might continue to protect the immediate downside and is closely followed by 100-day SMA support near the 111.55 region, which if broken might turn the pair vulnerable to extend its downfall in the near-term.
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