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   “¢   The USD remains on the defensive on the back of steadily slowing US inflation.
   “¢   Softer Chinese data dent risk sentiment and underpins JPY’s safe-haven demand.
   “¢   Market participants eye US economic data for some short-term trading impetus.

The USD/JPY pair came under some renewed selling pressure on Tuesday and dropped to 2-1/2 week lows, around the 111.35 region in the last hour.

The pair failed to capitalize on the overnight attempted bounce to the 112.00 neighbourhood and a combination of negative forces exerted some fresh downward pressure during the Asian session on Tuesday.

The US Dollar held on the defensive amid expectations that the Fed will stick to its cautious stance amid steadily cooling US inflation, further reinforced by March PCE report released in the previous session.

Apart from a subdued USD price action, bearish traders further took cues from a weaker trading sentiment around equity markets, which tends to underpin the Japanese Yen’s relative safe-haven demand.  

The latest disappointment from Chinese manufacturing PMI, which unexpectedly fell to 50.2 in April, underscored weakness in the world’s second-largest economy and dented investors’ appetite for riskier assets.

The global risk-aversion, reinforced by the ongoing slide in the US Treasury bond yields, largely offset the recent optimism over a possible US-China trade deal and did little to lend any support to the major.  

Moving ahead, today’s US economic docket – featuring the release of pending home sales, the Conference Board’s consumer confidence index and Chicago PMI will be looked upon for some short-term trading impetus.  

The key focus, however, will be on the latest FOMC monetary policy update on Wednesday, which followed by Friday’s important release of the closely watched US monthly jobs report (NFP) will help determine the pair’s next leg of a directional move.

Technical outlook

As Omkar Godbole, Analyst and Editor at FXStreet writes, “the path of least resistance appears to be on the downside. The 50-day MA support, currently at 111.33, could soon come into play. A violation there would expose the next major support lined up at 110.84 (April 10 low). A weekly close above 112.00 is needed to revive the bullish outlook.”