USD/JPY refreshes session lows, below 110.50 level

The greenback held weaker through the mid-European session on Tuesday, now dragging the USD/JPY pair to daily lows in the region of the 110.40 level. 

Despite Friday's strong US jobs report, investors seemed convinced that the Fed would be reluctant to continue with its gradual monetary policy tightening. Subdued inflationary pressure, which has remained stubbornly below the Fed's 2% target has been providing a significant drag on the US Dollar and did little to help the pair to build on post-NFP recovery from sub-110.00s level, over 1-1/2 month lows. Hence, the latest US inflation figures, due for release on Friday, would now be looked upon for some immediate respite for the USD bulls. 

Meanwhile, traders seem to have largely ignored a modest recovery in the European equity markets, which tends to dent the Japanese Yen's safe-haven appeal, with the prevalent bearish sentiment surrounding the greenback acting as an exclusive driver of the pair's offered tone.

Today's US economic docket, featuring the release of JOLTS Job Openings is unlikely to have any significant impact on the pair's movement but might still help grab some short-term trading opportunities. 

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: "The bullish momentum hasn’t really gathered pace, despite bullish price RSI divergence and the sideways breach of the falling trend line.
The failure at the 110.98 [61.8% Fib R of June low-July high] - 110.94 [23.6% Fib R of July high and Aug 4 low] has opened doors for a revisit to trend line support seen around 110.41-100.20 levels."

"However, the dips are likely to be short lived, given the last week’s long legged doji candle. Thus, we could be in for an inverse head and shoulders pattern with the neckline resistance at 111.09. A break above the same would add credence to the argument that the spot has bottomed out and could yield a rally to 11234 [inverse head and shoulders breakout target as per the measured height method]. On the downside, only an end of the day close below 110.00 would revive the bearish view" he added.