- Some renewed USD selling exerted some follow-through pressure on USD/JPY.
- Powell did not touch the subject of negative rates and provided some respite.
- Concerns about the second wave of coronavirus might cap any strong gains.
The USD/JPY pair reversed a knee-jerk slide to the 106.75 region and rallied around 30-35 pips in the last hour, albeit lacked any strong follow-through.
The pair extended the previous day’s retracement slide from near three-week tops and remained under some selling pressure through the early North American session amid a broad-based US dollar weakness. Against the backdrop of speculations that the Fed might be forced to push rates below zero, a fresh leg down in the US Treasury bond yields kept exerting some downward pressure on the greenback.
The intraday USD bearish pressure remained unabated after the Fed Chair Jerome Powell said that the economic path ahead was highly uncertain and also subject to significant downside risks. However, the fact that Powell did not touch on the subject of negative interest rates provided a much-needed respite to the USD bulls and extended some support to the USD/JPY pair.
The pair jumped back above the 107.00 mark, well within the striking distance of session tops, albeit fears over the second wave of coronavirus infections might keep a lid on any further gains. Hence, it will be prudent to wait for some strong follow-through buying before traders start positioning for an extension of the pair’s recovery from multi-week lows set last week.
Technical levels to watch
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