USD/JPY struggles to build on yesterday’s bounce, holds weaker below 109.00 handle

   •  Follow-through USD uptick fails to help gain traction.
   •  Reverses a major part of yesterday’s modest recovery bounce.
   •  Risk-off mood underpins JPY’s safe-haven demand. 

Having posted a session high near the 109.20 region, the USD/JPY pair came under some renewed selling pressure and eroded a major part of previous session's modest recovery bounce.

A goodish US Dollar rebound helped the pair to gain some positive traction at the start of a new trading week. The steady climb extended through the early Asian session but lacked any follow-through traction despite a follow-through USD uptick, which now seems to be drawing support from a continuous upsurge in the US Treasury bond yields.

A fresh wave of global risk aversion trade, as depicted by a sea of red across Asian equity markets, was seen underpinning the Japanese Yen's safe-haven appeal and seems to be the only factor exerting downward pressure on the major.

It would now be interesting to see if the pair is able to defend recent lows or bears regain their dominant position as the market focus now shifts to the highly anticipated FOMC meeting, which would help determine the next leg of directional move.

With risk-off sentiment playing a key role in driving the pair's movement, today's release of Conference Board's US Consumer Confidence Index for January might also provide some opportunities for short-term traders. 

Technical outlook

Valeria Bednarik, American Chief Analyst at FXStreet writes: “The 4 hours chart shows that the advance has been so far corrective, with the potential of further gains limited at the time being, as despite the Momentum indicator entered in positive territory, is still at neutral levels, the RSI indicator has turned flat around 46, as the price continues developing far below bearish moving averages. The highs around 109.70/80 form a  resistance area that the pair needs to surpass to confirm a steeper recovery ahead.”