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  • USD/JPY was seen consolidating this week’s sharp fall to monthly lows.
  • The USD remained depressed near two-week lows and capped the upside.
  • The risk-on mood undermined the safe-haven JPY and extended some support.

The USD/JPY pair lacked any firm directional bias and remained confined in a narrow trading band, just above mid-104.00s through the early European session.

A combination of diverging forces failed to provide any meaningful impetus to the major, instead led to a subdued/range-bound price action for the second consecutive session on Thursday. The US dollar languished near two-week lows, which, in turn, was seen as a key factor that capped the upside for the USD/JPY pair.

Wednesday’s weaker US consumer inflation figures, along with dovish comments by the Fed Chair Jerome Powell kept the USD bulls on the defensive near two-week lows. Powell said that the job market is far from fully recovered and that the Fed isn’t considering raising interest rates from the current near-zero levels.

That said, the underlying bullish sentiment in the financial markets undermined demand for the safe-haven Japanese yen and helped limit the downside for the USD/JPY pair. The global risk sentiment remained well supported by the progress in coronavirus vaccinations and expectations for a massive US fiscal spending.

Apart from this, a modest uptick in the US Treasury bond yields extended some support to the USD/JPY pair. This makes it prudent to wait for some strong follow-through selling below monthly lows, around the 104.40 region touched on Wednesday, before traders start positioning for an extension of the recent downward trajectory.

Market participants now look forward to the release of the usual Initial Weekly Jobless Claims data from the US for a fresh impetus later during the early North American session. Traders might further take cues from the broader market risk sentiment, the US bond yields and the USD price dynamics for some short-term opportunities.

Technical levels to watch