USD/JPY stages a remarkable recovery, back closer to 116.50

After being slammed to three-week lows, the USD/JPY pair staged an impressive recovery and reversed over 80-pips from session low. 

Currently trading around 116.40-45 region, resurgent US Dollar demand seems to be the only factor contributing to the pair's recovery from multi-week lows. 

The recovery momentum, however, stalled just short of mid-116.00s and the pair remained in bearish territory for the day as the prevalent cautious sentiment around equity markets continued lending support to the Japanese Yen's safe-haven appeal.

Moreover, retracing US treasury bond yields, albeit off session through, was still weighing on the greenback and hindering the pair's recovery move. 

Thursday's US economic docket, especially ADP report and ISM non-manufacturing PMI, would be looked upon for reinforcing optimistic view surrounding the US economy and should provide fresh impetus for short-term traders ahead of Friday's official NFP report. 

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet, notes, "Pair’s bearish divergence and discouraging price action on Tuesday, coupled with the failure to hold above the confluence of key trend lines followed by a drop to 116.42 today confirms the uptrend from November 9 low of 101.19 has made a short-term top at 118.61. Expect the pair to breach the double top neckline support of 116.04 and extend the slide to 114.80 levels."

He further writes, "Only a rebound from the neckline support of 116.04 followed by a daily close above 117.43 would open doors for a re-test of 118.66 (recent high). A daily close above 118.66 would signal continuation of the rally from the November 9 low of 101.19."