USD/JPY surrenders daily gains, retreats to 113.35 post dismal US data

A fresh wave of greenback selling pressure emerged during early NA session, with the USD/JPY pair reversing all of its early gains to 113.75 region and retreating further below mid-113.00s after yet another disappointing US release.

Currently trading around 113.35 level, nearly unchanged from Friday's closing level, the pair ran through some fresh offers after data released from the US showed manufacturing activity in New York State region unexpectedly contracted during the month of May. The Empire State Manufacturing Index dropped to -1.0 during May, down from 5.2 reported in April and was worse than 7.0 expected. 

Against the backdrop of Friday's weaker US monthly retail sales and inflation data, disappointing manufacturing data further dampened expectations for a faster Fed rate-tightening cycle through 2017 and attracted some fresh selling pressure surrounding the greenback.

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Market, however, remained convinced that the Fed would eventually move towards raising interest-rates at its June meeting. Hence, stability in the US treasury bond yields seems to be lending some support and helped the pair to hold just above session lows, at least for the time being.

With the US economic data out of the way, broader market risk-sentiment and the US bond yield dynamics would remain key determinants of the pair's movement through NY trading session on Monday.

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Technical levels to watch

Valeria Bednarik, Chief Analyst at FXStreet notes: "From a technical point of view, failure in the 114.30 region, just shy of a major long term Fibonacci resistance at 114.50, has increased chances of further slides this week. In the daily chart, however, a steeper decline is not yet clear, as the price remains above horizontal moving averages, whilst technical indicators retreated from overbought levels, heading south well above their mid-lines. Shorter term, the 4 hours chart presents a strong downward momentum, given that technical indicators head south within bearish territory, posting lower highs on recoveries ever since topping at overbought territory last Thursday. The 100 SMA in this last time frame heads higher around 112.10, around a strong Fibonacci support, where the bearish strength will meet some support, should the pair extend its decline."