USD/JPY retreats further, 113.00 mark at risk on softer US data

   •  US weekly jobless claims unexpectedly rose in the previous week. 
   •  Philly Fed index eases more than expected, import prices also disappoint.
   •  Risk-on mood/surging US bond yields lending some support.

The USD/JPY pair extended its pull-back the mid-European session highs and has now moved on the brink of breaking below the 113.00 handle post-US economic data.

The pair met with some fresh supply after data released from the US showed initial jobless claims unexpectedly jumped by 10K to 249K during the week ended Nov. 10, worse than 235K expected and previous week's 239K. 

Adding to this, Philly Fed manufacturing index unexpectedly eased more than expected to 18.9 for November, down from 27.9 previous, while import price index ticked higher 0.2% m-o-m, also missing consensus estimates pointing to 0.4% increase, and failed to provide any additional boost to the US Dollar.

The pair, however, has managed to hold with modest daily gains, supported by surging US Treasury bond yields and the prevalent risk-on environment, which tends to dent the Japanese Yen's safe-haven appeal.

Today's US economic docket also features the release of industrial production data, which along with Fedspeaks would be looked upon for some short-term trading opportunities. Investors focus, however, would remain glued to a key vote on the long-awaited US tax legislation, which would help determine the next directional move.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: "The spot looks set to test 112.00 levels and may drop to 111.56 (head and shoulders target). The upside is likely to be capped around 113.50, given the 5-day MA and the 10-day MA has adopted a bearish bias. Moreover, it could be a bull trap as suggested by the bearish breakdown on the US-Japan 10-year yield spread and risk-reversals at one-month low."

"Bullish breakout scenario - A break above 114.00 (descending trendline resistance) would add credence to the upward sloping 5-week MA and 10-week MA and shall open doors for 115.00-115.50 levels" he added.