- USD/JPY once again struggled to capitalize on its move beyond the 200-day SMA.
- Sustained USD selling bias was seen as a key factor capping gains for the major.
- Surging US bond yields, the upbeat market mood helped limit any deeper losses.
The USD/JPY pair edged lower through the mid-European session and refreshed daily lows, around the 105.20-15 region in the last hour, albeit quickly recovered few pips thereafter. The pair was last seen trading around the 105.35-40 area, nearly unchanged for the day.
The pair continued with its struggle to find acceptance, or build on the momentum beyond the very important 200-day SMA and witnessed a modest intraday pullback from the 105.60-65 region. The downtick was exclusively sponsored by a broad-based US dollar weakness, though the upbeat market mood undermined the safe-haven Japanese yen and helped limit the downside for the USD/JPY pair.
The USD languished near three-week lows amid doubts about the US economic recovery and failed to gain any respite from surging US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond jumped back above the 1.25% for the first time since February 2020 amid the prospects for the passage of President Joe Biden’s proposed $1.9 trillion COVID-19 stimulus package.
Meanwhile, the negative factor, to a larger extent, was offset by the optimistic outlook for the global economy. The progress in coronavirus vaccinations and expectations for a massive US fiscal spending plan continued boosting investors’ confidence. This was evident from the ongoing bullish run in the equity markets, which weighed on traditional safe-haven currencies, including the JPY.
That said, it will be prudent to wait for a sustained move beyond a technically significant moving average (200-DMA) before confirming a bullish bias. a subsequent strength beyond monthly swing highs, around the 105.75 region, will, in turn, set the stage for a further appreciating move for the USD/JP pair amid absent relevant market moving economic releases from the US.
Technical levels to watch
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