USD/JPY challenges 112.00 handle, session lows

The USD/JPY pair failed to break through an important supply zone near mid-112.00s and has now dropped to fresh session lows. 

The market seems to have largely ignored a modest uptick in the US Dollar demand and the latest comments by the BOJ Governor Haruhiko Kuroda, who was noted saying that it’s premature to review monetary policy and CPI shows it's clearly too early to discuss exit strategy.

With investors looking past the latest political developments in the Euro-zone's largest economy, European equity markets seemed gaining some positive traction at the start of a new trading week. But the prevalent positive trading sentiment around European equity markets, which tends to weigh on the Japanese Yen's safe-haven appeal, did little to lend any support to the pair. 

In absence of any fresh catalyst, the pair's retracement back closer to the 112.00 handle could alos be attributed to some cross driven weakness, stemming out of a sharp pull-back in the EUR/JPY cross. 

Meanwhile, the lastest news that the Japanese PM Shinzō Abe is likely to dissolve parliament on 28 Sept. might help limit deeper losses, at leasty for the time being. 

Hence, the key focus would remain on Abe's upcoming news conference at 0900GMT, where confirmation of a snap election for next month could weigh on the Japanese Yen and help the pair to regain some fresh traction.

Technical levels to watch

A strong follow through weakness below the 112.00 mark is likely to accelerate the fall towards 111.65-60 intermediate support before the pair eventually drops to test the 111.00 handle. 

On the upside, immediate strong resistance is now pegged near mid-112.00s, above which the pair is likely to surpass last Thursday's swing high resistance near 112.70 level and aim towards reclaiming the 113.00 handle.