- USD/JPY witnessed a modest pullback from five-month tops set earlier this Wednesday.
- The pullback lacked any obvious catalyst and could be attributed to some profit-taking.
- A combination of factors extended some support and helped limit any deeper losses.
The USD/JPY pair seesawed between tepid gains/minor losses on Wednesday and was last seen trading in the neutral territory, around the 106.00 mark.
The pair built on the previous day’s move beyond the 106.00 mark and gained some positive traction during the first half of the Asian session on Wednesday. The momentum pushed the USD/JPY pair to the highest level since September 2020, though ran out of the steam near the 106.20-25 area.
The USD/JPY pair, for now, seems to have snapped five consecutive days of the winning streak. The pullback could be attributed to some profit-taking amid slightly overbought conditions on short-term charts. Bearish traders further took cues from a softer tone surrounding the US Treasury bond yields.
That said, a combination of factors held bearish traders from placing aggressive bets and assisted the USD/JPY pair to attract some dip-buying near the 105.85 zone. The US dollar added the overnight solid recovery move gains from three-week tops and is likely to extend some support to the major.
Apart from this, the optimism over a strong global economic recovery – amid the progress on COVID-19 vaccine rollouts – might continue to undermine demand for the safe-haven Japanese yen. This, in turn, should further contribute to limit any meaningful corrective slide for the USD/JPY pair.
Hence, it will be prudent to wait for some strong follow-throughs selling before confirming that the USD/JPY pair might have already topped out in the near-term. Market participants now look forward to the release of the US monthly Retail Sales data for some short-term trading opportunities.
Technical levels to watch
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