USD/JPY in search of a firm direction, stuck around 113.50 level

Having posted a daily high at 114.00 handle and low at 113.40 level, the USD/JPY pair has been confined within 20-pips trading range near mid-113.00s.

Following Tuesday's short covering recovery move, investors seemed reluctant to drive the major higher as the greenback remains under pressure in wake of the US President Donald Trump's protectionist stance and a lack of details about his fiscal stimulus plans. 

Today's release of better-than-expected Japanese trade surplus data lend an additional support to the Japanese Yen and collaborated towards hindering the pair's follow through momentum. 

However, the prevalent risk-on mood, as depicted by buoyant sentiment surrounding equity markets, is seen denting Yen's safe-haven demand and extending some support to the major. 

Investors await for this week's important US macroeconomic releases, due on Friday, before determining the pair's near-term directional move. In the meantime, the pair remains at the mercy of USD price action and broader market risk sentiment.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet notes, “A daily close below 112.50 would add credence to the falling top formation on the daily chart and signal continuation of the retreat from the December high of 118.66. Below 112.50, support is seen at 111.99 (38.2% fib of Trump rally) - 111.36 (Nov 28 low). On the higher side, only a daily close above the 50-DMA level of 114.61 would signal the correction has ended.”