USD/JPY reverses Monday’s corrective slide

After an initial dip to sub-115.00 mark, the USD/JPY pair gained fresh traction and has now reversed its Monday’s entire minor profit-taking slide.

Currently trading around 115.40-45 band, testing session peak, the prevalent risk-on mood is driving investors away from traditional safe-haven assets, including the Japanese Yen, and is assisting the pair to maintain its bid tone closer to Monday's 10-month peak beyond 116.00 handle. 

In absence of any major market moving releases on Tuesday, investors will remain focused on a slew of important US macro data on Wednesday, including monthly retail sales data and PPI print, ahead of the much anticipated Fed monetary policy decision. 

From technical perspective, the pair has now remained in near-term overbought territory for an extended period of time. However, any corrective slide has been short-lived, possibly suggesting excessive speculative positions in anticipation of a faster Fed rate-tightening cycle in 2017. Hence, any negative shock from the Fed would trigger a sharp corrective slide in the near-term.

Technial levels to watch

Omkar Godbole, Analyst and Editor at FXStreet, notes, "The bearish price-RSI divergence coupled with the bearish MACD crossover suggests the pair could be topping out in the short-term. On the daily chart, bullish invalidation is seen only below 110.00 levels. On the higher side, resistance is seen at 118.05 (Oct 2015 low) and 120.00 levels."