- The optimistic mood undermined the safe-haven JPY and assisted USD/JPY to regain traction.
- The prevalent USD selling bias failed to provide any impetus and might cap any further gains.
- Relatively thin liquidity conditions further warrant some caution before placing bullish bets.
The USD/JPY pair edged higher through the first half of the European session and refreshed daily tops, around the 103.60-65 region in the last hour.
The pair caught some fresh bids on Thursday and built on the overnight modest intraday bounce of around 20 pips. The uptick was exclusively sponsored by the underlying bullish sentiment, which tends to weigh on the safe-haven Japanese yen, and seemed rather unaffected by the prevalent US dollar selling bias.
Hopes for an imminent Brexit deal overshadowed the US President Donald Trump’s threat to not sign a long-awaited COVID-19 stimulus bill. Apart from this, the reopening of UK-France border signalled a step back toward normality after the discovery of a new variant of the coronavirus in Britain and boosted investors’ confidence.
On the other hand, the US dollar remained depressed amid expectations that the Fed will maintain its accommodative policy and announce more stimulus in 2021 to aid economic recovery from COVID-19. This, in turn, failed to provide any additional boost to the USD/JPY pair and turn out to be the only factor capping gains.
Investors might also refrain from placing aggressive bets, rather prefer to move on the sidelines amid relatively thin liquidity conditions on the Christmas eve. This makes it prudent to wait for some strong follow-through buying before positioning for any further appreciating move amid absent relevant market-moving economic data.
Technical levels to watch
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