USD/JPY recovers back to 112.00 handle

The USD/JPY pair caught fresh bids at lower level and has now moved back above 112.00 handle, recovering around 70-75 pips from session low. 

Currently trading around 112.00 handle, the pair initially fell sharply and dropped to 111.35 level amid safe-haven demand in wake of the prevalent risk-off mood, as depicted by early weakness in Japanese equity market (Nikkei 225) and crude oil prices. However, a broad based recovery in Asian equity markets, with Nikkei 225 now trading in neutral territory, helped the major to reverse some of its early steep losses. 

Moreover, with December Fed rate-hike action already fully priced-in, growing expectations of faster Fed rate-tightening cycle next year was further seen supporting the greenback and also contributed to the pair's recovery from session low. 

With an empty US economic docket, the pair would continue to take cues from the broader market risk sentiment ahead of this week's key US macro releases - quarterly GDP print and the keenly watched NFP data, which might influence Fed rate-hike expectations beyond December meeting and trigger the next leg of directional move for the pair. 

Technical levels to watch

Immediate upside resistance is pegged near 112.30-35 region above which the pair is likely to aim back towards reclaiming 113.00 handle and head towards testing 113.20-25 resistance area. On the downside, immediate support is now seen at 111.75 level, which if broken might drag the pair below session low support near 111.35 level, towards testing its next support near 111.00 round figure mark.