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  • USD/JPY failed to capitalize on the overnight gains and met with some fresh supply on Thursday.
  • A fresh leg down in the equity markets benefitted the safe-haven JPY and exerted some pressure.
  • Sliding US bond yields, concerns about the US economy held the USD bulls from placing fresh bets.

The USD/JPY pair traded with a mild negative bias through the early North American session and was last seen hovering near the lower end of its daily range, around the 105.80 region.

The pair came under some selling pressure on Thursday and eroded a part of the previous day’s goodish bounce of over 100 pips from monthly lows. A fresh leg down in the equity markets benefitted the Japanese yen’s safe-haven status and was seen as a key factor behind the USD/JPY pair’s pullback of around 35-40 pips from the 106.20 region.

The global risk sentiment took a hit after minutes of the last FOMC meeting – released on Wednesday – struck a gloomy note about the US economy. Against the backdrop of the impasse over the next round of the US fiscal stimulus measures, the minutes further fueled concerns about the US economic recovery and dented investors’ confidence.

The anti-risk flow was evident from a steep decline in the US Treasury bond yields, which further collaborated to the offered tone surrounding the USD/JPY pair. However, some follow-through US dollar buying might hold investors from placing aggressive bearish bets and help limit any deeper losses for the major, at least for now.

On the economic data front, the US Philly Fed Manufacturing Index for August fell more than expected to 17.2 as compared to 21 expected. Separately, the US Initial Jobless Claims unexpectedly jumped to 1.106 million as against consensus estimates pointing to a fall to 925K expected from the previous month’s upwardly revised reading of 971K.

The data did little to impress the USD bulls or provide any meaningful impetus to the USD/JPY pair. That said, it will be prudent to wait for some strong follow-through selling before confirming that the overnight recovery move might have already run out of the steam and positioning for the resumption of the prior depreciating move.

Technical levels to watch