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USD/JPY: Bears loosen grip, heading towards 121?

FXStreet (Mumbai) - The US dollar is attempting a tepid-recovery versus the Japanese yen as we progress towards the early European trades, pushing USD/JPY beyond hourly 100-SMA located near 120.75 area.

USD/JPY eyes 121 handle

Currently, the USD/JPY pair drops -0.26% to 120.79, testing the support-turned resistance located at 120.80 levels. The major trims losses and tires another attempt to regain 121 handle, although the upside looks limited as the JPY bulls continue to dominate.

The yen remains strongly bid versus the greenback since early Asia after the local currency received the fresh need impetus from the upbeat Japan’s industrial production data. Industrial output in Japan rose a solid 1% m/m in September, opposed to market
expectations of a 0.5% decline.

Moreover, the weakness in the USD/JPY pair could be partly attributed to a profit-booking spree witnessed in the USD longs after the US currency rallied to more than two-month highs against its major peers following the hawkish FOMC statement. The Fed pointed towards a probable rate hike at its Dec 15-16 gathering on Wednesday.

Looking ahead, markets now await the European open for further momentum, ahead advance GDP estimate from the US due later today. While BOJ policy decision due tomorrow remain the main highlight.

USD/JPY Technical levels to watch

The prices hover around 1h 100-SMA at 120.76, with the immediate resistance seen at 120.95/121 (5-DMA/ round number), above which the pair would climb further towards 121.28 (Oct 28 High). To the downside, the immediate support in sight is located at 120.61/54 (10-DMA/ 1h 50-SMA), below which 120.14 (20 & 50-DMA) would be tested.

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