USD/JPY bounces to the upside as Wall Street recovers

USD/JPY broke to the upside after the beginning of the American session and extended the recovery. Earlier the pair bottomed at 108.25, the lowest in four months and at the moment is moving toward 109.00. 

The sharp slide was triggered by risk aversion following another missile test from North Korea, that send the yen sharply higher. Then came a consolidation period and now the Japanese currency is pulling back as equity prices in the US erase losses. The Dow Jones is actually in positive territory, up 0.05%, after rising a hundred points from the lows. 

If the risk environment continues to improve, USD/JPY is likely to extend the recovery or to hold at current levels, far from the lows. While, if investor's mood deteriorates, the demand for the yen could rise again. 

Technical outlook 

USD/JPY continues to move with a clear bearish bias but the recent rally removed pressure. A decline back under 108.60, would expose daily lows and the risks of an acceleration. 

On the opposite direction, if the pair manages to rise and hold above 109.60/75 (horizontal resistance / 20-day moving average) it would gain support for an extension of the upside.