USD/JPY recovers early lost ground to 2-week lows, retakes 111.00 handle

   •  Slight improvement in risk-appetite prompts some short-covering move.
   •  Further gains remain capped amid escalating US-China trade tensions.

The USD/JPY pair recovered early lost ground to two-week lows and is now looking to build on its momentum back above the 111.00 handle.

The Japanese Yen continued benefitting from some safe-haven flows amid escalating trade tensions between the world's two largest economies, especially after China announced retaliatory tariffs of 25% on $16 billion worth of US products on Wednesday. 

This coupled with a weaker tone around the US Treasury bond yields kept the US Dollar bulls on the defensive and exerted some downward pressure during the Asian session on Thursday, dragging the pair to an intraday low level of 110.70, the lowest since July 26.

The selling pressure now seems to have abated, at least for the time being, with a slight improvement in investors' risk-appetite prompting some short-covering move and helping the pair to bounce off lows. 

On the economic data front, disappointing Core Machinery Orders data from Japan could also be one of the factors weighing on the Japanese Yen and contributing to the pair's intraday rebound of around 30-pips. 

Moving ahead, today's US economic docket, featuring the release of US Producer Price Index (PPI), which along with the usual initial weekly jobless claims data, will now be looked upon to grab some short-term trading opportunities later during the early North-American session.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet explains: “the pair is looking weak, courtesy of the breach of the rising trendline, lower highs pattern and a bearish crossover between the 5-day and 10-day MAs. What's more, the 14-day relative strength index (RSI) has also adopted a bearish bias.”

He further adds: “As a result, the pair is more likely to close below the 50-day MA today and confirm a bullish-to-bearish trend change. That would open the doors to 100-day MA, currently located at 109.61. On the higher side, only a close above the post-BOJ high of 112.15 would revive the bullish view and shift risk in favor of a rally to 113.17.”