The USD/JPY pair extended Wednesday's rejection move from 50-day SMA important hurdle and weakened further below 114.00 round figure mark.
Currently trading around 113.85-80 region, the pair has now reversed over 100-pips from yesterday's three-week tops touched in the aftermath of upbeat US macro data. Slightly cautious comments from the Fed Chair Janet Yellen, during her second day of testimony before the House Financial Services Committee on Wednesday, negated strong US macro releases - CPI and retail sales data, and triggered a broad based greenback retracement. In fact, the key US Dollar Index briefly jumped to one-month highs before reversing sharply and has now drifted back below 101.00 handle.
Wednesday's economic data, however, pushed rate-hike expectations with the CME group's FedWatch Tool now pricing-in 31% chances of a rate-hike action in March - up from previous day's probability of 18%.
The US Dollar price dynamics would remain as exclusive driver of the pair’s near-term movement and hence, focus would be the US economic docket featuring the release of weekly jobless claims, housing data (housing starts, building permits) and Philly Fed manufacturing index for fresh impetus during early NA session.
Technical levels to watch
A follow through retracement below 113.50 support could get extended towards 113.25 important horizontal support, which if broken is likely to drag the pair back below 113.00 handle towards testing 112.65-60 horizontal support.
Meanwhile on the upside, momentum back above 114.00 handle might now confront resistance at 114.25-30 region above which the pair is likely to make a fresh attempt towards retesting 50-day SMA important hurdle near 115.00 psychological mark.
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