USD/JPY recovers majority of early lost ground ahead of US data

The USD/JPY pair managed to bounce off session low near 113.25 region and has now reversed majority of its daily losses ahead of the US data.

Currently trading around 113.70 level, a goodish rebound in the US treasury bond yields seems to be the key factor driving flows away from the Japanese Yen. Adding to this, a modest recovery in the European equity markets, pointing to a slight improvement in investors' risk-appetite, further dented demand for traditional safe-haven assets, including the Japanese Yen, and collaborated to the pair's recovery from session low.

Despite of the supportive factors, the pair has not been able to attract some strong buying interest amid intense selling pressure surrounding the greenback. In fact, the key US Dollar Index slumped to six month lows on Tuesday, in wake of recent disappointing US macro data, and has been a key factor refraining investors from buying the major. 

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Moving ahead, today's US economic docket would now be looked upon for some immediate respite for the US Dollar bulls. However, given that the incoming US data now seems to have dampened prospects for a faster Fed rate-tightening cycle through 2017, traders are more likely to utilize any bounce to initiate fresh short positions, with the pair breaking below the 113.00 handle and extending last week's retracement from near two-month highs remains a distinct possibility. 

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Technical levels to watch

Immediate resistance is pegged near 113.80 level, above which the pair is likely to aim towards surpassing the 114.00 handle and head towards testing 114.30-35 strong hurdle. On the flip side, 113.25-15 region now seems to have emerged as immediate strong support, which if broken is likely to drag the pair towards 112.75-70 intermediate support ahead of the 112.20-15 strong support.