- USD/JPY gained traction on Thursday and recovered further from the 105.00 mark.
- A modest pickup in the USD demand was seen as a key factor lending some support.
- The risk-off mood, sliding US bond yields kept a lid on any strong gains for the pair.
The USD/JPY pair held on to its modest gains through the early European session, albeit lacked any strong follow-through and remained well within the previous day’s trading range.
Having managed to defend the key 105.00 psychological mark, the pair managed to regain some positive traction on Thursday and was being supported by a modest pickup in the US dollar demand. A setback in the development of a vaccine for the highly contagious coronavirus disease, along with concerns about a rapid rise in new COVID-19 cases provided a modest lift to the greenback’s status as the global reserve currency.
However, a fresh leg down in the equity markets underpinned the Japanese yen’s perceived safe-haven status and kept a lid on any strong gains for the USD/JPY pair. Traders further took cues from a weaker tone surrounding the US Treasury bond yields, which capped any meaningful upside for the buck. This makes it prudent to wait for some follow-through buying before positioning for any further appreciating move.
From a technical perspective, the USD/JPY pair has been trending lower along a downward sloping channel over the past three days or so. The set-up favours bearish traders and supports prospects for further weakness. A convincing breakthrough the 105.00 mark will add credence to the bearish outlook and set the stage for a slide back towards September monthly swing lows, around the 104.00 round-figure mark.
Market participants now look forward to the US economic docket, highlighting the release of Philly Fed Manufacturing Index, the usual Initial Weekly Jobless Claims and Empire State Manufacturing Index. The data might influence the USD price dynamics, which, along with the broader market risk sentiment, might produce some trading opportunities.
Technical levels to watch
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