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  • Fed rate cut expectations continued to weigh on the USD and capped the upside.
  • Risk-on mood undermined the JPY’s safe-haven status and helped limit the downside.

The USD/JPY pair ticked lower for the third consecutive session on Friday and remained well within the previous session’s swing lows, just above mid-108.00s.
The pair continued with its struggle to make it through the 109.00 handle and witnessed a modest pullback on Thursday amid persistent US Dollar selling bias. Firming market expectations that the Fed will move to cut interest rates in October kept the USD bulls on the defensive and turned out to be one of the key factors that kept a lid on the pair’s attempted move up.

Risk-on mood offset subdued USD demand

However, the prevalent risk-on mood, amid the recent optimism led by a partial US-China trade deal, weighed on the Japanese Yen’s safe-haven status and helped limit any deeper losses, at least for the time being. The pair, so far, has managed to hold its neck above a previous horizontal resistance breakpoint, around the 108.50-45 region.
Meanwhile, the latest comments by the Bank of Japan (BoJ) deputy governor, Masayoshi Amamiya, saying that Japanese economy is expanding moderately but downside risks from global slowdown are rising, did little to provide any meaningful impetus to the major.
In absence of any major market moving economic releases, the broader market risk sentiment/USD price dynamics might continue to act as key determinants of the pair’s momentum and produce some short-term trading opportunities on the last day of the week.

Technical levels to watch