USD/JPY finds support ahead of 112, starts consolidating daily losses

• USD/JPY remains on track to close the day below 100-DMA.
• Wall Street starts the year on a positive note.
• DXY struggles to make a meaningful recovery.

After refreshing its lowest level since December 15 at 112.04, the USD/JPY pair gained some traction in the US afternoon and retraced a small part of its daily drop. As of writing, the pair was trading at 112.25, still losing 40 pips, or 0.35%, on the day.

Earlier today, the bearish momentum of the pair was able to gather strength via a broad-based USD weakness. The US Dollar Index, pressured by the ongoing greenback sell-off, dropped to its lowest level since early September at 91.47. However, the upbeat Markit Manufacturing PMI data, which revealed an expansion in the sector's activity at a faster-than-expected rate, helped the buck finally show some resilience against its rivals. As of writing, the DXY was down 0.4% at 91.65. 

In the meantime, the positive mood surrounding the major equity indexes in the U.S. allowed the market sentiment improve in the second half of the day, making it difficult for the traditional safe-haven JPY to find demand. At the moment, the Dow Jones Industrial Average and the S&P 500 are up 0.16% and 0.5% respectively.

The meeting minutes of the December Fed meeting will be released tomorrow, and a hawkish tone in the official statement could provide a boost to the USD and allow the DXY extend its recovery ahead of Friday's critical NFP report.

Technical levels to consider

The pair could face the first technical support at 111.75 (200-DMA) followed by 110.85 (Nov. 27 low) and 110 (psychological level). On the upside, resistances align at 112.50 (100-DMA), 113 (psychological level/20-DMA) and 113.65 (Dec. 21 high). Meanwhile, the RSI indicator on the daily chart still has room on the downside before showing oversold conditions below the 30 mark, suggesting that the bearish pressure could persist in the near-term.