- USD/JPY erased large portion of daily losses in early American session.
- Risk-off market environment helps JPY stay resilient against USD.
- 10-year US T-bond yield loses more than 3%.
The USD/JPY pair staged a decisive rebound in the early American session but lost its bullish momentum before reaching 106.00. As of writing, the pair was down 0.08% on a daily basis at 105.70.
The risk-averse market environment seems to be helping the USD find demand on Friday. The US Dollar Index (DXY), which lost 0.28% on Thursday, extended its recovery after breaking above 93.00 and touched a fresh weekly high of 93.40. At the moment, the DXY is up 0.58% on the day at 93.27.
Meanwhile, the JPY is also capitalizing on risk-off flows as a safe haven and doesn’t allow the pair to push higher. Reflecting the flight-to-safety, the 10-year US Treasury bond yield is losing more than 3% on Friday.
Later in the session, the IHS Markit will publish the preliminary Manufacturing and Services PMI reports for the US. Existing Home Sales for July will be the last data of the week from the US. Stronger-than-expected PMI readings could force the JPY to lose interest and cause USD/JPY to target 106.00. Investors will keep a close eye on Wall Street’s performance as well. S&P 500 futures are posting small losses ahead of the opening bell.
USD/JPY near-term outlook
“Beneath 105.53 is needed to further increase downside momentum with support then seen next at 105.27, then more importantly at the 105.18/10 lows,” Credit Suisse analysts said.
“Below here can negate the ‘reversal day’ for a resumption of the core downtrend with support then seen next at 104.65/55,” analysts added in their technical analysis. “A close above 106.04 can see an extension of the recovery with resistance next at 106.44/46, then the 55-day average at 106.62/67, which we look for then ideally cap to define the top of a near-term range.”
Additional technical levels to watch for
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