USD/JPY defends 110.00 handle for the time being

The USD/JPY pair has managed to bounce off the key 110.00 psychological mark and has now recovered around 25-30 pips from session lows.

The pair extended its recent downward trajectory and dropped to its lowest level since mid-June during Asian session on Tuesday amid persistent US Dollar selling bias. Fading expectations of another Fed rate hike action in 2017 coupled with the US political turmoil has been one for the key factor weighing on the major.

The selling pressure, however, seems to have abated for the time being amid prevalent risk-on environment, which was seen denting the Japanese Yen's safe-haven appeal. Today's better-than-expected release of China Caixin manufacturing PMI, at 51.1 for July vs. 50.4 expected eased concerns of a sharp economic slowdown in the world's second largest economy and remained supportive of the positive trading sentiment around Asian equity markets. 

Later during the NA session, the US economic data - personal income/spending data and the Fed's preferred inflation gauge - Core PCE Price Index and ISM manufacturing PMI, would now be looked upon for some fresh impetus.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes, "Monday’s close below 110.62 indicates the sell-off from the high of 114.49 has resumed. The daily RSI is yet to hit the oversold territory. This, coupled with a spike in the ATM volatility shows the spot could very well dip below 110.00 levels today."