USD selling into the 4pm London Fix saw USD/JPY drop back from multi-month highs in the 106.90s in recent trade. The pair is likely to remain subdued ahead of key stateside events later in the week. USD/JPY has dropped back from session and multi-month highs in the 106.90s in recent trade amid a broad softening of the US dollar that has seen the US Dollar Index (DXY) drop back below the 91.00 level again. That means JPY is now flat on the day versus USD, while the DXY is now down around 0.2% amid strength in the likes of EUR/USD (which recent rallied back above the 1.2050 mark and into the 1.2070s) and in GBP/USD (which has recovered all the way back to the 1.3950 mark from Asia Pac lows of under 1.3880). No fundamental catalysts were behind the pick-up in USD weakness that saw USD/JPY drop back from highs, rather traders are citing weakness heading into the 4pm London fix. Technical resistance is also being cited; when it rose into the 106.90s, USD/JPY hit the top of a long-term uptrend that has been capping the price action since the start of 2021. Note also that resistance in the form of the August 2020 highs also resides around the 107.00 level, likely contributing to the pick-up in selling pressure. Technically speaking, whilst USD/JPY maintains the bullish bias that has been intact for most of the year so far, the pair may struggle in the short-run and some bulls might be hoping for a pullback to support in the 106.20 area (the mid-February highs) before adding to longs. Driving the day It’s been a quiet session for USD and JPY for the most part, amid a lack of fundamental catalysts in the form of either US data or sentiment-changing updates regarding the pandemic or US fiscal stimulus. News that Tokyo is likely to ask for an extension to its state of emergency (after six other prefectures ended theirs over the weekend) has not appeared to dent JPY sentiment much. Nor has underwhelming Japanese Company data; in Q4 2020, Company Profits were down 4.7% YoY, Company Sales were down 4.5% YoY and Business Capital Expenditure was down 4.8% YoY. Trade is likely to remain subdued ahead of key events later in the week, which are mainly focused in the US, implying the USD side of the equation will continue to drive USD/JPY; Wednesday sees the release of the ISM Services PMI report for February, a timely update on the state of the US’ service sector recovery, as well as February’s ADP National Employment Change estimate, a release that helps set expectations for the NFP release later in the week. Thursday sees Fed Chair Jerome Powell (expected to reiterate the dovish Fed script whilst now showing any concerns about rising bond yields) plus Weekly Jobless Claims numbers and Friday sees the release of the February Labour Market Report, which will be the main event of the week. As far as USD/JPY is concerned; if US data comes in stronger than expected, this could trigger further upside in US bond yields, which would put further upwards pressure on the US rate advantage over Japan, which could act as a further tailwind to USD/JPY. Conversely, any combination of poor data and/or a dovish enough tone from Fed Chair Jerome Powell could be enough to trigger a further retracement in US bond yields, which would have the opposite impact on USD/JPY. FX Street FX Street FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. 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