USD/JPY off session low, still weaker below 113.00 handle

The USD/JPY pair extended its reversal from fresh multi-month highs touched during early Asian session on Friday and is now sustaining weakness back below 113.00 handle.

Currently trading around 112.85-90 region, off session through level of 112.55 touched in the past hour, profit taking mood surrounding the US Dollar has been the sole driver of the pair's slide on Friday following its relentless up-move of over 1200-pips in the past three week.

The post-election US Dollar rally paused on Friday as traders now seem to readjust their positions ahead of next week's key event risks from the US, prelim GDP print and monthly jobs report (NFP), which might influence the Fed's near-term monetary policy outlook beyond December meeting and provide fresh impetus to the US Dollar's next leg of directional move.

In the meantime, second-tier US macro releases - Goods Trade Balance, Prelim Wholesale Inventories and Markit's Flash Services PMI, might provide some opportunities for short-term traders during NA session on Friday.

Technical outlook

A team of Analysts at Dukascopy Bank SA, notes, "Despite technical indicators retaining bullish signals, the Buck now is under higher risk of weakening against the Japanese currency, as the pair still faces a rather strong resistance, now formed by the weekly R2 and the 23.60% Fibo. Even if bulls manage to push the Greenback higher, a surge beyond the ascending channel’s resistance line at 114.44 is unlikely. The base case scenario is a decline up to 100 pips, as a slump further would imply a downside breach of the channel pattern."

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