USD/JPY bulls struggling near 109.00 handle

The USD/JPY pair continued losing ground through the early European session and momentarily slipped below the 109.00 handle in the last hour. 

The pair failed to build on overnight solid rebound, led by a smart recovery in the US stock markets and met with some fresh supply well ahead of the key 110.00 psychological mark. 

Despite some signs of stability in global equity markets, which tends to dent the Japanese Yen's safe-haven appeal, the pair struggled to gain any traction and was being weighed down by a mildly softer US Dollar tone. 

Meanwhile, the downslide could be attributed to some cross-driven weakness steaming out of a sharp reversal in the GBP/JPY cross. Moreover, the price-action seems to suggest that investors might still be playing for a return of global risk aversion trade. 

As Omkar Godbole, Analyst and Editor at FXStreet notes, “investors still need to be cautious as equities could witness another round of sell-off if the 10-year treasury yield moves above 2.87 percent, in which case the demand for the Japanese Yen would spike. Also worth noting is the rising demand for JPY calls, i.e. the options market looks super bullish on Yen.”

Hence, it would be prudent to wait for some fresh buying interest to emerge before confirming that the pair might have bottomed out in the near-term. There aren't any major market-moving economic releases due from the US, albeit a scheduled speech by the New York Fed President William Dudley might influence the price-action later during the early NA session.

Technical outlook

According to Omkar, “A break above 109.71 (previous day's high) looks likely, would add credence to the short-term bullish technical set up and could yield a rally to 110.48 (double bottom neckline). A close above would open doors for 111.67 (200-day MA).”  

“On the downside, big support is seen at 108.00. A weekly close below the same would revive the bearish outlook” he further adds.