Search ForexCrunch
  • USD/JPY remained confined in a narrow trading band through the early European session.
  • Retreating US bond yields kept the USD bulls on the defensive and capped gains for the pair.
  • The upbeat US economic outlook supports prospects for an extension of the recent move up.

The USD/JPY pair lacked any firm directional bias on Thursday and remained confined in a range, above mid-110.00s through the early European session.

A combination of factors failed to provide any impetus, rather forced the pair to consolidate its recent strong positive move to the 111.00 neighbourhood, or one-year tops touched on Wednesday. The yield on the benchmark 10-year US government bond retreated further from 14-month tops and slipped to the 1.70% threshold. This, in turn, kept the US dollar bulls on the defensive and capped the upside for the USD/JPY pair.

That said, the downside remains cushioned amid the underlying bullish sentiment surrounding the USD. The impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan have been fueling expectations for a relatively faster US economic recovery from the pandemic. The optimistic outlook should continue to underpin the greenback and help limit any meaningful corrective slide for the USD/JPY pair.

It is worth reporting that Biden recently announced the opening of the COVID-19 vaccine program for 90% of American adults by April 19 and also unveiled a $2.3 trillion infrastructure package. Wednesday’s mostly upbeat US macro releases – the ADP report and Chicago Manufacturing PMI – reinforced the upbeat outlook for the US economy. That said, overbought conditions on short-term charts might hold traders from placing fresh bullish bets.

Nevertheless, the path of least resistance for the USD/JPY pair remains up and any meaningful pullback might still be seen as a buying opportunity. Market participants look forward to Wednesday’s release of the US ISM Manufacturing PMI, due later during the early North American session. The key focus, however, will remain on the closely-watched US monthly jobs report, popularly known as NFP, scheduled for release on Friday.

Technical levels to watch