USD/JPY remains capped below 109.00 handle post-US data

   •  USD built on modest recovery move post-data.
   •  The pair fails to benefit from a strong USD recovery. 

The USD/JPY pair held on to its modest recovery gains and had a rather muted reaction to the US economic data. 

The US Dollar gained minor boost and built on its modest rebound after data released from the US showed personal income rose 0.4% m-o-m (0.3% expected) in December and personal spending eased to 0.4% during the reported period. 

Meanwhile, the core PCE price Index, the Fed's preferred inflation gauge, fell short of consensus estimates and edged lower to 1.7% y-o-y as compared to 1.8% reported in the previous month. 

The pair, however, moved little and remained below the 109.00 handle, despite the ongoing upsurge in the US Treasury bond yields. The prevalent cautious sentiment around equity markets, which tends to benefit the Japanese Yen's safe-haven appeal, seems to be only factor keeping a lid on any meaningful recovery for the major. 

Hence, it would be prudent to wait for a strong buying interest before confirming that the pair might have bottomed out around the 108.30-25 region, last Friday's over 4-month lows. 

Technical outlook

Valeria Bednarik, American Chief Analyst at FXStreet writes: “Technically, the daily chart shows that the bearish potential has strengthened as the pair continued falling far below its 100 and 200 DMAs, with the shortest slowly turning south above the largest. Indicators in the mentioned chart hover within oversold levels, lacking clear directional strength. Shorter term, and according to the 4 hours chart, the risk also leans towards the downside, with the pair developing below bearish moving averages, while the RSI indicator hovers around 35 with a limited bearish strength, anyway skewing the risk toward the downside.”