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USD/JPY recovers a major part of early lost ground, back closer to 111.00 mark

  • Aggressive USD long-unwinding exerted some initial pressure on USD/JPY on Tuesday.
  • A turnaround in the global risk sentiment helped the pair to bounce off 110.00 mark.
  • A sustained move back above 111.00 level needed to confirm any further intraday gains.

The USD/JPY pair has managed to recover a major part of its early lost ground, with bulls looking to extend the momentum beyond the 111.00 mark.

The pair failed to capitalize on the previous day's positive move to one-month tops, instead witnessed some intraday selling pressure on Tuesday amid some aggressive US dollar long-unwinding trade.

The Fed's unprecedented move on Monday to buy unlimited amounts of Treasury bonds and mortgage-backed securities helped ease concerns over tightening liquidity and weighed heavily on the USD.

Meanwhile, the open-ended and unlimited QE boosted the global risk sentiment, which was evident from strong gains across the global equity markets and dampened the Japanese yen's safe-haven demand.

The risk-on flow was further reinforced by a goodish pickup in the US Treasury bond yields, which assisted the pair to stall its intraday slide and attract some dip-buying near the key 110.00 psychological mark.

The pair has recovered around 70-75 pips from daily swing lows, albeit bulls are likely to wait for some follow-through strength beyond the 111.00 mark before positioning for any further appreciating move.

In the meantime, Tuesday's US economic docket – featuring the flash version of the US Manufacturing and Services PMI – will now be looked upon for some meaningful trading opportunities.

Technical levels to watch

 

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