USD/JPY defends 111.00 handle, for the time being

The USD/JPY pair remained well-offered through early European session, albeit has managed to bounce off session lows to currently trade around 111.15-20 region.

A fresh wave of global risk-aversion trade, led by sell-off in oil markets and reinforced by bearish trading sentiment around global equity markets, boosted demand for traditional safe-haven assets and drove the pair farther from monthly tops touched in the previous session.

Adding to this, a softer tone around the US Treasury bond yields did little to extend any support to the US Dollar and further collaborated to the pair's slide for the second consecutive session.

The selling pressure, however, seems to have abated near the 111.00 handle, at least for the time being, amid growing expectations for additional Fed rate-hike action by the end of this year. 

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Today's release of existing home sales data from the US would now be looked upon for some trading impetus during early NA session. In the meantime, broader market risk sentiment would continue to act as an exclusive driver of the pair's momentum on Wednesday.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: "The bearish MACD divergence and oil-led risk-off could yield a pull back to 110.81 – 110.66, although the broader outlook remains constructive given the bullish price action on the weekly chart and the bullish crossover between 50-MA & 100-MA on the 4-hour chart."

"Only a daily close below 110.66 (200-DMA) would signal the rally from 108.80 has ended at 111.79 and would revive the bearish trade" he added further.