USD/JPY continues to erase daily losses, steadies below 109

• Wall Street looks to finish the month on a strong note.
• US Dollar Index climbs above 95.50 in the NA session.
• Unemployment in Japan is expected to edge down to 2.4% in December.

After finding daily support at 108.50, the USD/JPY extended its rebound in the NA session and rose to 108.90 before going into a consolidation phase. As of writing, the pair was trading at 108.82, losing 0.12% on a daily basis.

The greenback continued to retrace yesterday sharp  fall that was caused by the dovish message delivered in the FOMC statement with the US Dollar Index turning positive on the day above 95.50. However, the fact that the 10-year T-bond yield is losing more than 2% on the day suggests that the US Dollar Index’s recent recovery is mostly technical and supported by month-end flows rather than fundamental developments. At the moment, the DXY is up 0.15% at 95.55.

Meanwhile, improved market sentiment on Thursday provided an additional boost to the pair in the second half of the day. Although the Dow Jones Industrial Average stays in the negative territory amid the selling pressure surrounding the financials, both the S&P 500 and the Nasdaq Composite post strong gains and remain on track to record their largest monthly percentage gains in nearly three years.

Japan’s Institue of Labour will publish its jobs/applications and the unemployment rate for December in the early Asian session. However, ahead of the NFP report from the U.S., the market action is expected to remain subdued.

Key technical levels