- USD/JPY is moving sideways a little above 108.00 on Wednesday.
- US Dollar Index extends rebound into second straight day.
- 10-year US T-bond yield is edging higher following Tuesday’s slump.
After posting small daily losses on Tuesday, the USD/JPY pair edged lower and touched its weakest level since early March at 107.88 on Wednesday. In the absence of significant fundamental drivers, however, the pair staged a technical correction and was last seen trading flat at 108.10.
The sharp decline witnessed in Wall Street’s main indexes helped the greenback find demand on Tuesday. The US Dollar Index (DXY) snapped a two-day losing streak and gained 0.15%. However, USD/JPY struggled to gain traction with the benchmark 10-year US Treasury bond yield losing more than 3%.
Currently, the DXY continues to inch higher and the 10-year US bond yield is clinging to recovery gains at 1.568%, helping USD/JPY stay in the positive territory.
Meanwhile, the latest reports from Japan suggest that the government is considering declaring a state of emergency for Tokyo and Osaka amid rising coronavirus infections.
There won’t be any significant macroeconomic data releases from the US in the remainder of the day and the S&P 500 Futures stay flat, suggesting that the market sentiment will not be able to provide a directional clue either.
USD/JPY near-term outlook
Assessing USD/JPY’s possible movements in the next 1-3 weeks, “the USD is likely to weaken further but the major support at 107.65 may not come into the picture so soon,” said UOB Group analysts. “On the upside, a break of 108.85 (no change in ‘strong resistance’ level) would indicate that the pullback in USD that started about 2 weeks ago has run its course. Looking ahead, the next support below 107.65 is at 107.30.”
Additional levels to watch for
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