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  • USD/JPY tracks the USD weakness amid dovish Fed, vaccine hopes.
  • Japanese political uncertainty offers support to the spot.
  • Markets await US Manufacturing PMIs for fresh directives.

The persistent downbeat mood around the US dollar against its main rivals, keeps the bounce in the USD/JPY pair limited, as we head towards the European opening bells.

At the time of writing, the spot sheds 0.25% and reverts towards daily lows of 105.60. The latest bounce in the major lost legs near 105.80 while sellers continued to lurk above the 106 barrier.

In early Asia, USD/JPY spiked to 106.04 highs, as the yen came under pressure following the release of mixed Japanese employment and capex data. The gains, however, were quickly reversed after the Japanese equities opened in the red and Jibun Bank/Markit Manufacturing PMI beat estimates with 47.2 in August.

The bears extended control and drove the pair back towards the midpoint of the 105 level after the US dollar resumed its downside. Asian traders cheered the coronavirus vaccine optimism alongside the Fed’s stance of low-interest rates for a longer period, downing the dollar.

The Japanese political headlines took over and thrashed the yen bulls once again, prompting a tepid bounce back to near 106.80 area. The yen slipped after Japan’s ruling Liberal Democratic Party (LDP) General Council Chairman Shunichi Suzuki announced that the leadership election will be conducted in a simplified rather than full-scale format respecting the urgency.

Although, the dollar bears keep any recovery attempts shallow, as the attention turns towards the US ISM and Markit ISM Manufacturing PMIs for fresh impetus. The ISM Employment sub-index will be closely eyed ahead of Friday’s US Non-Farm Payrolls data.

USD/JPY technical levels

The bears eye the 105.50 support, below which the August low of 105.10 could be put to test once again. To the upside, the daily high at 106.04 could be challenged en route the 50-DMA at 106.45.

USD/JPY additional levels


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