- Sustained USD selling failed to assist USD/JPY to capitalize on its early attempted recovery.
- The risk-on mood undermined the JPY’s safe-haven demand and helped limit the downside.
- Market participants now look forward to the ECB decision and US data for a fresh impetus.
The USD/JPY pair quickly recovered around 25-30 pips from intraday lows and was last seen trading with modest gains, around the 106.65-70 region.
The pair failed to capitalize on its early attempted recovery move, instead met with some fresh supply near the 106.85-90 region and drifted back closer to six-week lows set in the previous session.
The pullback lacked any obvious catalyst and was solely led by the prevalent selling bias around the US dollar, which remained depressed on the back of Wednesday’s dismal US GDP print and dovish FOMC.
The advance estimates showed that the US economy contracted by 4.8% in the three months to March and the Fed cautioned that the negative impact from the pandemic could prolong in the medium term.
The Fed also left the door open to more policy easing, which coupled with the optimism over a push to re-open economies globally dampened the greenback’s status as the global reserve currency.
Meanwhile, the upbeat mood around the global equity markets undermined the Japanese yen’s safe-haven demand and turned out to be the only factor that extended some support to the USD/JPY pair.
The already stronger global risk sentiment got an additional boost from relatively successful clinical trials of Gilead Sciences’ retroviral drug – Remdesivir – to treat those infected by COVID-19.
The pair quickly moved back into the positive territory, albeit remained well below daily tops. Hence, it will be prudent to wait for some follow-through buying before positioning for any further recovery.
Market participants now look forward to the US economic docket – highlighting the release of Initial Weekly Jobless Claims – for some impetus later during the early North-American session.
In the meantime, the highly anticipated ECB monetary policy decision might influence the broader market risk sentiment and contribute towards producing some intraday trading opportunities.
Technical levels to watch
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