USD/JPY: tepid recovery fails ahead of 113.00 handle, NFP in focus

   •  A modest USD uptick/positive bond yields helped gain some positive traction.
   •  The cautious mood continues to underpin JPY’s safe-haven demand and keeps a lid.
   •  The keenly watched US monthly jobs report eyed for a fresh directional impetus.

The USD/JPY pair built on the overnight rebound from five-week lows, albeit struggled to move back above the 113.00 handle.

The arrest of a top executive of Chinese telecommunications firm Huawei Technologies, at the request of the US, sparked fresh worries about the US-China relations and dampened investors' appetite for riskier assets. The global flight to safety boosted the Japanese Yen's perceived safe-haven status and prompted some aggressive selling around the major. 

The downward momentum accelerated further following the disappointing release of the ADP report and dragged the pair to an intraday low level of 112.23. Meanwhile, upbeat US ISM non-manufacturing PMI print for November, coupled with a late recovery in the US equity markets eased the bearish pressure and helped the pair to once again defend 100-day SMA important support.

The recovery momentum extended through the Asian session on Friday and was further supported by a modest pickup in the US Treasury bond yields/a mildly positive tone surrounding the US Dollar. Bulls, however, seemed lacking strong conviction amid the recent inversion in part of the US Treasury bond yield curve, which is seen as an early warning sign for a potential recession.

The immediate focus will be on the latest US monthly jobs report, especially wage growth data due to be released later on Friday. The latest non-farm payrolls data seems unlikely to dampen prospects for an eventual Fed rate hike move this month, but will be looked upon for some short-term trading opportunities.

Technical levels to watch

Momentum beyond the 113.00 mark is likely to confront some fresh supply near the 113.15-20 region, above which a bout of short-covering could lift the pair further towards the 113.70-75 horizontal resistance en-route the 114.00 handle.

On the flip side, weakness below the 112.65 region could get extended back towards the 112.25 region (100-DMA), which if broken should turn the pair vulnerable to break through the 112.00 handle and head towards testing 111.75-70 support area.
 

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