- Sorter risk tone benefitted the safe-haven JPY and exerted some pressure on USD/JPY.
- Sliding US bond yields kept the USD bulls on the defensive and added to the selling bias.
- The lack of follow-through selling warrants some caution for aggressive bearish traders.
The USD/JPY pair traded with a mild negative bias through the early European session, albeit has managed to hold comfortably above the key 105.00 psychological mark.
The pair continued with its struggle to build on this week’s strong rebound from the vicinity of the 103.00 mark, or multi-month lows, and has been oscillating in a narrow trading band over the past three trading session. Concerns about the economic fallout from the continuous surge in new cases kept a lid on the recent optimism over a potential COVID-19 vaccine.
This was evident from a modest pullback in the US equity futures, which underpinned demand for the safe-haven Japanese yen and prompted some selling around the USD/JPY pair on Thursday. Bearish traders further took cues from a steep decline in the US Treasury bond yields, which kept the US dollar bulls on the defensive and contributed to the pair’s softer tone.
Meanwhile, the imposition of stricter restrictions in several US states now seemed to have revived hopes for additional fiscal stimulus measures to support the economy. This could turn out to be another factor that might weigh on the greenback and exerted some pressure on the USD/JPY pair. However, the lack of follow-through selling warrants some caution for bearish traders.
Moving ahead, market participants now look forward to the US macro data for a fresh impetus. Thursday’s US economic docket highlights the releases of the latest consumer inflation figures and Initial Weekly Jobless Claims. This, along with the broader market risk sentiment, will influence the USD/JPY pair and produce some meaningful trading opportunities.
Technical levels to watch
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