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  • USD/JPY has recovered 14 pips from session lows despite weakness in Treasury yields.  
  • The US equity index futures are also flashing red.  
  • The pair needs to rise above 109.07 to invalidate the bearish case.

USD/JPY has recovered from session lows but remains on the defensive below 109.07.

The pair is currently trading at 108.50, representing marginal losses on the day, having hit a low of 108.36 earlier today.

The 14-pip recovery is somewhat confounding, given the futures on the S&P 500 are still reporting a 0.25% drop, courtesy of the renewed US-China political tensions.

Further, the US 10-year Treasury yield is trading at 1.769%, the lowest level since Nov. 4. Notably, the yield has shed 20 basis points since topping out of 1.972% on Nov. 7.

While the pair has trimmed losses, the bias remains bearish the daily MACD histogram printing deeper bars below the zero line, a sign of the strengthening of bearish momentum. The relative strength index is also reporting bearish conditions with a below-50 print, validating the pair’s recent breach of an ascending trendline from the Aug. 26 low of 104.45.

The outlook would turn bullish if and when the pair finds acceptance above 109.07 (Nov. 18 high). That would invalidate the lower highs setup.

Daily chart

Trend: Bearish

Technical levels