USD/JPY recovers back to 114.00 neighborhood

The USD/JPY pair reversed early dip to a three-day low near 113.24 level and is now attempting a move towards reclaiming 114.00 handle.

Currently trading around 113.90 region, testing session peaks, the pair caught fresh bids at lower level amid some fresh US Dollar buying interest during early European trading session. A positive opening in the European equity markets pointed to improving market risk-sentiment and drove flows away from perceived safe-haven assets, including the Japanese Yen. Moreover, a sharp recovery in the US treasury bond yields also collaborated to the pair's up-surge in the past hour or so. 

Earlier on Tuesday, the pair was seen building on Monday's slide after BOJ decided to leave its monetary policy unchanged and revises up its economic growth outlook. Meanwhile, the central bank's expectations for inflation to remain on a weak note accompanied by BOJ Governor Haruhiko Kuroda that negative rates are appropriate for meeting price target and that it is early to discuss QE exit strategy helped the pair to recover early losses and turn positive for the day. 

Focus now shifts to the US economic docket, featuring the release of Chicago PMI and CB's Consumer Confidence Index for January, for some short-term trading opportunities. The broader trend, however, would remain dependent on this week's key event risks - the FOMC meeting and the keenly watched NFP data. 

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet notes, "Back-to-back candles with long tails (lower shadow), coupled with the rising daily 50-MA suggests dip demand is likely. A move back above 113.99 (23.6% of 2011 low – 2015 high) would add credence to the candles with long tails and the rising 50-DMA and thus, would open doors for 115.07 (weekly high). A daily close above 115.07 would signal the correction from the recent high of 118.66 has ended. On the lower side, only a weekly close below 112.52 would signal continuation of the retreat from the recent high of 118.66."