USD/JPY bounces off lows but lacks follow-through

   “¢   Surging US bond yields helps limit initial downslide.
   “¢   Fading safe-haven demand provides an additional boost.
   “¢   Retracing USD now seemed to cap any strong recovery.

The USD/JPY pair has managed to recover early lost ground, albeit seemed struggling to move back above the 109.00 handle.

The pair was initially seen struggling to build on overnight rebound from the 108.00 neighborhood, or one-month lows, and fell to an intraday low level of 108.35 during the Asian session on Wednesday.  

However, a goodish pickup in the US Treasury bond yields helped limit further downside. This coupled with some signs of stability in global equity markets, coupled with renewed optimism over the US-North Korea summit dented the Japanese Yen’s safe-haven appeal and further collaborated to the pair’s rebound.  

The uptick, however, lacked any strong conviction and was being capped by a modest US Dollar retracement. This coupled with the ongoing political turmoil in Italy might continue to keep a lid on any meaningful up-move, at least for the time being.

Moving ahead, today’s US economic docket, featuring the release of ADP report on private sector employment and the second estimate of Q1 GDP growth figures, would now be looked upon for some fresh impetus. In the meantime, broader market risk sentiment would continue to act as a key determinant of the pair’s movement through the European trading session.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: “A close below 108.02 (50% Fib R of Mar-May rally) would bolster the bearish technical factors listed above and could yield a temporary drop to 107.22 (61.8% Fib R of Mar-May rally).”

“On the higher side, a close above the 200-day MA of 110.17 would revive the bullish outlook,” he added further.