USD/JPY: consolidating the early Asian drop ahead of Tokyo

USD/JPY dropped in early Asia by 30 pips in a risk-off environment following a turn in sentiment with the recent disappointments in the US economy and outlooks for Central Bank's policies. 

USD/JPY had otherwise been bid in a recovery of the sell-off in late August's Fed fueled rally from below the 100 handle to 104.31 the high. However, the recent run of data in the US economy has missed expectations and results come in stark contrast to the recent bullishness and hawkishness form Fed speakers advocating for a hike this year. A flight to safety following poor outlooks in the US economy and subsequent downgrades from the Atlantic Fed's GDP forecasting model, along with concerns that Central Banks are running out of ammunition, has resulted in a stronger Yen.

USD/JPY levels

"In the 4 hours chart, the price is above the 100 and 200 SMAs, both around 101.80, while technical indicators have turned horizontal well above their mid-lines," explained Valeria Bednarik, chief analyst at FXStreet, adding, " Overall, the bearish potential seems limited in the short term, but it will take an advance beyond 103.00/10 to see the pair posting some additional gains this Monday, up to 104.31, last week high."