USD/JPY back above 114.00, Fed expectations limiting downslide

After an initial dip to 113.50 level, the USD/JPY pair managed to recover its lost ground and has now move back to 114.00 handle.

The pair on Monday failed to build on to its strong gains and once again reversed from 114.80 resistance area. Looking at the broader picture, the pair's corrective slide has been short-lived and hence, the recent price action could be categorized as near-term consolidation phase following its post-US election sharp up-surge of around 1350-pips. 

On Tuesday, the prevalent buoyant sentiment surrounding Asian equity markets is seen weighing on the Japanese Yen's safe-haven appeal and extended support to the pair's recovery from session low. However, investors preferred to stay on the sidelines ahead of the much awaited FOMC meeting on December 13-14. With December Fed rate-hike action fully priced-in, investors now seek clarity over the central bank's near-term monetary policy outlook for 2017 (dot-plots) in order to determine the pair's next leg of directional move.

In the meantime, traders will look forward to today's US economic docket, featuring - revised non-farm productivity, trade balance data and factory orders, to grab some short-term trading opportunities. 

Technical levels to watch

On a decisive move back above 114.00 handle, the pair is likely to dart back towards 114.50 intermediate resistance before attempting a move back towards 114.80 strong resistance. A clear break through 114.80 resistance might now seems to accelerate the up-move immediately beyond 115.00 psychological mark towards testing its next major resistance near 116.00 round figure mark. 

Meanwhile on the downside, weakness below session low support near 113.50 level seems to drag the pair back below 113.00 handle, towards testing 112.85 support area (yesterday's low) below which the corrective slide could get extended towards 112.00 mark, with 112.55 level providing some intermediate support.