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  • USD/JPY stays directionless since the start of the week.
  • US Dollar Index clings to modest recovery gains, stays below 90.00.
  • 10-year US Treasury bond yield stays in a consolidation phase following Tuesday’s drop.

The USD/JPY pair is having a difficult time making a decisive move in either direction for the third straight day on Wednesday. As of writing, the pair was posting small daily gains at 108.90.

The sharp decline witnessed in the US Treasury bond yields didn’t allow USD/JPY to gain traction this week. On the other hand, the risk-positive market environment limited the safe-haven JPY’s upside and forced USD/JPY to move sideways.

In the absence of high-tier macroeconomic data releases and fundamental drivers, the pair stays in a consolidation phase. Meanwhile, the benchmark 10-year US T-bond yield, which lost more than 2% on Tuesday, is little changed on the day at 1.56%.

Investors will keep an eye on US stocks in the second half of the day. Currently, the S&P Futures and the Nasdaq Futures are up 0.3% and 0.45%, respectively, suggesting that risk flows could return to markets in the second half of the day. Nevertheless, it seems unlikely that Wall Street’s action could provide a directional clue to USD/JPY.

On Thursday, Durable Goods Orders, Initial Jobless Claims and Q1 GDP (second estimate) data from the US will be watched closely by market participants.

USD/JPY outlook

Rabobank analysts think USD/JPY is likely to continue to push higher and argued that a dip to 108.60/70 area could be seen as a buying opportunity.

“While there is a possibility that the fourth wave of the virus in the region may lend a little support near-term, price activity in the last few weeks suggests that safe-haven buying of the JPY this is likely to be limited as long as optimism regarding the recoveries in the US and Europe remains in place,” analysts explained.  “We would be looking for any dips below trendline support in the USD/JPY 108.60/70 area as buying opportunities.”

Technical levels to watch for