USD/JPY surges through 116.00 handle

The USD/JPY pair's recovery move gained further traction during early NA session and the pair is now building on to its momentum back above 116.00 handle.

Currently trading around 116.25 region, testing session peaks, the pair caught fresh bids at lower level and has now jumped over 100-pips from session low amid resurgent greenback buying interest. Growing expectations of faster US economic growth, led by aggressive fiscal stimulus by Trump administration, and speculation of faster pace of Fed rate-hike moves in 2017 continues to underpin demand for the US Dollar. Reviving US treasury bond yields is also supporting market expectations and has been a key factor collaborating to the pair's recovery on Tuesday. 

Meanwhile, possibilities of some near-term stops getting triggered on a decisive move above 116.00 handle might have also contributed to the pair's sharp bullish spike in the past hour or so.

However, further up-move might be restrained as investors might remain cautious ahead of the US President-elect Donald Trump’s first news conference on Wednesday. 

Later during the NY session, the release of JOLTS job openings might assist short-term traders to grab some short-term trading opportunities. 

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet, notes, "Despite the failure to hold above 117.00 levels on Monday, the dip demand seen today (recovery from 115.65 to 116.00) warrants caution on the part of the bears. Moreover, Friday’s sharp reversal from 115.06 has established the psychological level of 115.00 as a strong support, thus sell-off is likely to gather pace once prices break below 115.00 levels. The odds of a bearish break remain high given the bearish price RSI divergence on the daily chart.

He further writes, "On the higher side, only a daily close above 117.50 would add credence to the dip demand seen in Asia and open the door to a possible break above the recent high of 118.66 levels."