USD/JPY recovers from 61.8% Fib, peeps above 1-hr 50-MA

• Sellers ran out of steam near 61.8% Fib.
• USD/JPY needs to hold above 1-hour 50-MA.

The USD/JPY bears ran out of steam early today as prices neared 110.15 (61.8% Fib R of Sep. low-Nov. high), allowing for a corrective move higher.

The currency pair cut through the 1-hour 50-MA level of 110.63 and was last seen trading at a session high of 110.80.  It is worth noting that the pair has repeatedly failed in the last 48 hours to cut through offers around 1-hour 50-MA.

Thus, a convincing break above the key moving average could see a technical correction gather pace. The moving average seems to have shed the bearish bias (is bottoming out). Also, analysts believe the markets are overpricing the probability of near-term BOJ tightening and the BOJ is more likely to reiterate its ultra-easy stance. So, Yen could give up its gains. Hence, the spot may hold above 1-hour 50-MA this time.

However, fears of the government shutdown in the US and flat action in the treasury yields could cap upside in the pair.

USD/JPY Technical Levels

A move above 110.95 (23.6% Fib R of Jan. 8 high-Jan. 17 low) would open doors for 111.41 (38.2% Fib R of Jan. 8 high - Jan. 17 low) and 111.65 (Oct. 16 low). On the downside, support at 110.32 (Jan. 15 low) and 110.15 (61.8% Fib R of Sep. low-Nov. high) could be put to test if the bulls fail to defend the 1-hour 50-MA of 110.64.