USD/JPY corrective slide extends further below 111.00 level

The greenback remained on the back-foot, with the USD/JPY pair extending its retracement from the multi-month high touched earlier.

Currently trading near session low, around 110.60 region, the overall US Dollar Index witnesses a profit taking slide after reaching its highest level since March 2013 and has been the sole contributor of the pair's corrective slide from the highest level since late May. 

Growing speculations about aggressive fiscal spending by Trump administration has been driving inflation expectations and Treasury bond yields higher. Adding to this, market expectations that the Fed would eventually move towards raising interest rates, is further contributing to the bullish sentiment surrounding the greenback. 

Traders on Monday, however, seemed inclined to take some profits off the table following the pair's relentless rally of nearly 1000-pips from post-US presidential election swing low near 101.20 region and near-term overbought conditions. 

This week's key event risks for the pair's well-established near-term up-trend includes the release of monthly durable goods orders and FOMC meeting minutes, both due on Wednesday and would help investors determine the next leg of movement for the pair. 

Technical outlook

Omkar Godbole, Editor and Analyst at FXStreet, notes, "The RSI is overbought on the daily and 4-hour chart. Meanwhile, the hourly RSI is diverging from the bullish price action. We also see two consecutive grave doji candles on the hourly chart. Furthermore, the daily MACD shows the bullish momentum has stalled. Hence, a correction to 5-DMA level of 110.00 appears likely. Moreover, such a move would confirm a bearish price-RSI divergence on the 4-hr chart."

He further adds, "On the higher side, only a daily close above 111.45 (May high) would signal continuation of the Trump rally."

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