USD/JPY pares majority of early losses, US data awaited

The USD/JPY pair maintained its offered tone through mid-European session, albeit has reversed majority of its losses to currently trade around 113.75-80 band.

Spot remained under some selling pressure for the second consecutive session as investors seemed reluctant to place fresh bullish bets ahead of important US macroeconomic releases - inflation figures and retail sales data. 

The US Dollar, however, remained supported by growing expectations for an eventual Fed rate-hike action next month and collaborated towards limiting further downslide. Today's US economic data would further influence market expectations and help determine the pair's next leg of directional move. 

Apart from the US economic docket, speeches by Chicago Fed President Charles Evans and Philadelphia Fed President Patrick Harker should also provide some impetus for the pair's movement on the last trading day of the week.

Meanwhile, traders also seemed to position themselves cautiously ahead of the G7 meeting, which is eventually benefitting the Japanese Yen's safe-haven appeal and contributing to a mildly softer tone surrounding the major.

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Technical outlook

"The bearish RSI divergence on the 4-hour chart and a bearish MACD crossover, coupled with the overbought condition of the daily RSI if followed by a breach of the rising trend line on the 4-hour chart would open doors for a deeper pull back to 113.00 (100-DMA + 10-DMA) and 112.50 levels. Dips below 112.50 are likely to be short lived as the 5-DMA and 10-DMA are still sloping upwards. On the higher side, only a daily close above 114.37 (previous day’s high) would revive the bullish view" writes Omkar Godbole, Analyst and Editor at FXStreet.