USD/JPY drops to two-week lows

The greenback extended its profit taking slide, with the USD/JPY pair reversing over 150-pips from yesterday’s peak and dropping to test the lowest level since Dec. 14. The pair, however, has bounced off around 15-pips from session through and is currently trading around 116.35-40 region.

Wednesday's weaker home sales data from the US signaled that the housing market could be losing steam ahead of the New Year and provided investors' an excuse to take some profits off US Dollar bullish bets. Adding to this weaker sentiment around European equity markets is lending additional support to the Japanese Yen's safe-haven appeal and collaborating to intense selling pressure around the major in light pre-New Year holiday trade on Thursday.

Lighter US economic docket, with initial jobless claims amongst the most notable data scheduled for release on Thursday, is unlikely to provide any fresh impetus for the pair's near-term trajectory. However, a slew of top-tier economic releases, including the keenly watched NFP scheduled at the beginning of a new month, would help investors determine the pair's next leg of directional move. 

Technical levels to watch

Immediate downside support is pegged near 116.15-10 region below which the pair seems all set to break through 116.00 handle and head towards testing 115.50-45 horizontal support. Conversely momentum back above 116.50-55 immediate resistance might now confront strong resistance near 117.00 handle, which if cleared might assist the pair back towards 117.50 resistance area.