USD/JPY faces rejection at key Fib, falls back to 106.00

• Chart driven recovery ran out of steam 61.8% Fib.
• JPY bulls banking on Aso's stance.

The USD/JPY witnessed a corrective rally as indicated by JPY risk reversals and oversold technical conditions, but failed to cut through 106.38 (61.8% Fibonacci retracement of June 2016 low - December 2016 high).

As of writing, the spot is trading just above the 106.00 mark. The currency pair looks set to tend the week lower by 2.55 percent. Also, the pair will close the week well below the support of the long-term ascending trendline (sloping upwards from the September 2012 low and June 2016 low).

The recovery in USD/JPY from the intraday low of 105.55 has been accompanied by a moderate drop in Treasury yields. Also, the greenback has trimmed losses across the board.

That said, it is too early to call a bottom as JPY bulls do not see BOJ or Japanese government undertake FX intervention any time soon. Moreover, the talk of FX intervention has been put to rest by Japanese Finance Minister Aso. Furthermore, the fears of a trade war and hard landing in the US will likely keep USD on the back foot.

USD/JPY Technical Levels

A break above 106.38 (61.8% Fib) would open up upside towards 106.86 (resistance on 1-hour chart) and 107.15 (1-hour 100-MA). On the downside, breach of support at 105.92 (previous hourly candle low) would expose support at 105.72 (monthly 200-MA) and 105.55 (daily low).