USD/JPY recovers losses as S&P 500 futures trim losses

• The USD/JPY has faded the drop to 112.35 and is now trading largely unchanged on the day at 112.57.
• The S&P 500 futures have trimmed losses, likely helping the USD/JPY regain poise.
• Technically speaking, a break above 112.73 would signal a continuation of recovery rally from the last week's low of 111.62.

The USD/JPY pair has recovered from intraday lows and could rise well above key resistance of 112.73 if the S&P 500 futures turn positive and European stocks report gains.

At press time, the USD/JPY pair is trading largely unchanged on the day at 112.57, having hit a low of 112.35 earlier today.

The decline witnessed in early Asia was likely associated with the 0.55 percent drop in the S&P 500 futures and the resulting rise in demand for the anti-risk JPY. However, the index futures are now trading almost flat-to-positive and the turn around may have helped USD/JPY regain poise. 

Looking forward, the European stocks may open on a positive note, as Moody's decision to cut Italy's credit rank by one step to Baa3 and retain "stable" outlook has likely removed an immediate threat of a downgrade to Junk.

As a result, the USD/JPY may find acceptance above key hurdle of 112.73 (high of Thursday's bearish outside-day). That would signal a continuation of the rally from the recent low of 111.62.

USD/JPY Technical Levels

Resistance: 112.73 (Thu's high), 113.00 (psychological hurdle), 113.18 (July 19 high)

Support: 112.35 (session low), 111.99 (50-day EMA), 111.62 (Oct. 15 low)