The USD/JPY pair remained under intense selling pressure through early European session on Friday and is now flirting with session lows near the 111.00 handle.
A weaker opening in the European equity markets intensified demand for traditional safe-haven assets and helped the Japanese Yen to build on early gains led by today's release of Japanese inflation numbers.
Adding to this, a sharp greenback retracement, with the key US Dollar Index dropping to session lows near the 97.00 handle, further aggravated the selling pressure.
The pair has now surrendered majority of its weekly gains and hence, a follow through selling pressure below the 111.00 handle might pave way for extension of the pair's reversal move from nearly two-month highs touched during early half of May.
Important macro data from the US - GDP print, Durable Goods Orders and revised UoM Consumer Sentiment Index are due for release on Friday and should provide fresh impetus for the pair's next leg of directional move.
Technical outlook
Omkar Godbole, Analyst and Editor at FXStreet writes: “The loss of bullish momentum as indicated by the MACD and the breach of the rising trend line on the RSI suggests the spot is likely to see a downside break from the inverted flag pattern. Inverted flag is a bearish continuation pattern, thus a downside break would indicate the sell-off from the high of 114.36 has resumed. The pair could revisit the recent low of 110.23. On the higher side, only a break above 112.32 (falling trend line on 4-hour + flag resistance + 50% Fib R of June 2015 high – June 2016 low) would revive the bullish view and open doors for a revisit to 114.36 levels. Also note, the daily RSI is struggling to rise above 50.00 (neutral level).”
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