USD/JPY in search of a firm direction, stuck in a range below mid-109.00s

   •  Stalls overnight rejection slide from the key 110.00 handle.
   •  A subdued USD demand does little to provide any meaningful impetus.
   •  Sliding US bond yields/cautious mood now seemed to cap gains.

The USD/JPY pair lacked any firm directional bias and seesawed between tepid gains/minor losses through the early European session on Friday.

The pair stalled overnight rejection slide from the key 110.00 psychological mark and now seems to have found a decent support near the 109.20 level. A modest US Dollar rebound was seen as one of the key factors lending some support and help limit deeper slide. 

However, a follow-through retracement in the US Treasury bond yields, as investors continue to assess the implication of Thursday's softer US CPI print on the pace of Fed rate hikes, did little to provide any additional boost.

This coupled with a cautious opening across European equity markets underpinned the Japanese Yen's safe-haven demand and further collaborated towards capping any meaningful up-move for the major.

With the only scheduled release of Prelim UoM Consumer Sentiment index, the US economic docket lacks any major market moving releases and hence, the pair remains at the mercy of broader market risk sentiment and the USD/US bond yield dynamics.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: “The repeated failure at 110.04 (61.8% Fib R) and the descending trendline adds credence to the bullish exhaustion, as indicated by the last week's doji candle and hence the pair will likely find acceptance below 108.65 - double top neckline.”

“Such a move would confirm a bull-to-bear trend change - meaning the corrective rally from the low of 104.63 has ended - and open the doors to 107.26 (double top breakdown target as per the measured height method),” he further added.