USD/JPY: Relief rally gathers pace on bullish outside day, risk-on

• The relief rally in USD/JPY gathered pace in Asia, eyes 200-hour moving average (MA). 
• Bullish outside day candle signals a short-term bottom is in place. 

The USD/JPY pair has hit a fresh session high of 105.75 and looks set to test scale the 200-hour MA hurdle of 105.78, courtesy of risk-on action in the stocks and signs of a turn around in the daily chart. 

The risk assets have been buoyed by reports stating that US and China are involved in backdoor talks to avoid a full-blown trade war. As of writing, the S&P 500 futures are calling for a 10 point or 0.38 percent rise in the index. Meanwhile, Shanghai Composite index has added 1 percent in early trade. Clearly, risk assets seem to have found their footing and that could bode well for the JPY bears, at least in the short-term. 

Further, the daily chart shows the pair created a bullish outside-day candle on Monday. A positive follow-through today would signal a short-term bullish trend reversal. Still, bulls need to observe caution as the pair will likely reverse course if the equities turn risk-averse. 

USD/JPY Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes: "Technically, the pair has more chances of correcting higher on a break above the mentioned 105.25 price zone, as in the 4 hours chart, technical indicators continue recovering from oversold readings, although they remain below their mid-lines, while the price is well below its 100 and 200 SMAs, all of which indicates that the pair is far from turning bullish."

Support levels: 104.90 104.60 104.25

Resistance levels: 105.20 105.60 106.00