USD/JPY bulls on the defensive, holds above mid-108.00s

• Bulls failed to capitalize on the overnight goodish bounce from one-week lows.
• Nervousness ahead of Thursday’s key data/event led to some repositioning trade.
• The downside is likely to remain limited amid the likelihood of a US-China trade deal.

The USD/JPY pair inched lower during the Asian session on Thursday and eroded a part of the previous session’s goodish intraday positive move.
 
The pair on Wednesday initially slipped to over one-week lows amid a mild risk-aversion mood led by the risk of a snap election in the UK, which underpinned the Japanese Yen’s safe-haven demand. However, some dip-buying interest helped limit the downtick, which coupled with a modest rebound in the US equity markets lifted the pair back closer to weekly tops.

Traders remain on the sidelines

Meanwhile, the US Dollar struggled to gain any meaningful traction in the wake of firming market expectations that the Fed will cut interest rates again in October. Adding to this, some repositioning trade ahead of Thursday’s more lively economic docket further collaborated to the pair’s softer tone, albeit the downside seemed cushioned on the back of the recent trade optimism.
 
Thursday’s key focus will be on the latest ECB monetary policy update and the release of prelim Euro-zone PMI prints for October. Later during the early North-American session, the release of US durable goods orders data might influence the USD price dynamics and further contribute towards producing some meaningful trading opportunities.

Technical levels to watch