“¢ The USD builds on overnight rebound and helped regain positive traction.
“¢ Fading safe-haven demand weighs on the JPY and remained supportive.
The USD/JPY pair caught some bids on Wednesday and managed to recover a part of the previous session’s sharp fall to two-week lows.
A sharp fall in the US Treasury bond yields, leading to an inversion of the short end of the yield curve, exerted some heavy downward pressure on the US Dollar and turned out to be a key trigger for bearish traders on Tuesday.
This coupled with another round of a selloff in the US equity markets further underpinned the Japanese Yen’s safe-haven demand and collaborated to the pair’s sharp intraday decline of over 100-pips, to the lowest level since Nov. 20.
However, a late USD recovery, supported by hawkish comments by New York Fed President Williams, saying that the economy was strong and supported further gradual rate hikes over the next year or so, helped ease the bearish pressure.
The greenback built on overnight rebound and was seen as one of the key factors that helped the pair to regain some positive traction on Wednesday, with bulls now looking to extend the momentum further beyond the 113.00 handle.
However, the prevalent risk-off mood, coupled with a weaker tone around the US bond markets might continue to contribute towards keeping a lid on any runaway rally amid absent relevant market-moving economic releases.
Technical outlook
Omkar Godbole, Analyst and Editor at FXStreet explained, “the 100-day MA support of 112.24 could be put to test in the next day or two. Indeed, the spot has moved back higher to 113.00. These gains, however, could be short-lived.”
“It is worth noting that the 100-day MA caught the lows on a closing basis in August, September and October. As a result, a close below that level would signal an end of the rally from the March low of 104.63,” he added further.
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