USD/JPY inter-markets: Recovery to remain short-lived?

The yen staged a solid rebound so far this Thursday, with risk-averse market conditions the main reason behind today’s move lower in USD/JPY.

A drastic turnaround in risk conditions took the bulls off the feet following a worse-than Chinese trade report, which sent USD/JPY almost 100-pips lower from fresh three-month tops reached at 104.63 levels post-Tokyo open.

During the European session, the spot failed several attempts to sustain above 104 handle, but in vain, as risk-off remains in full steam in wake of weaker Chinese trade data, which continues to weigh on the sentiment in Europe. Meanwhile, the CBOE Volatility Index, the "fear gauge" of near-term investor anxiety traded at fresh monthly highs near 17 handle, indicating broader market uncertainty.

Hence, the safe-haven yen continues to find support and is expected to keep any recovery in USD/JPY short-lived. Meanwhile, a profit-taking slide in the US dollar against its major peers, after the buck hit fresh seven-month highs, also caps the recovery in the spot.

Looking ahead, focus now remains on the Chinese inflation and US retail sales data due tomorrow for fresh direction on the USD/JPY price-action.