USD/JPY off lows, still in the red around 105.30-25 region

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  • USD/JPY witnessed some fresh selling on Friday and eroded a part of the overnight gains.
  • A modest USD pullback, weaker US bond yields exerted downward pressure on the pair.
  • The downside remains limited, warranting some caution before placing fresh bearish bets.

The USD/JPY pair maintained its offered tone through the early European session, albeit has managed to trim a part of its early losses to the 105.20-15 region.

The pair met with some fresh supply on the last trading day of the week and eroded a part of the previous day’s positive move of around 45 pips from the vicinity of the key 105.00 psychological mark. The downtick was exclusively sponsored by a modest US dollar pullback, though signs stability in the equity markets dented demand for the safe-haven Japanese yen and helped limit the downside for the USD/JPY pair.

The greenback edged lower during the first half of the trading action on Friday amid fading hopes of additional US fiscal stimulus measures ahead of the US presidential election on November 3. Adding to this, sliding US Treasury bond yields further undermined the buck. However, concerns about a steep rise in new coronavirus infections in Europe and the US extended some support to the USD’s status as the global reserve currency.

The lack of any strong follow-through selling warrants some caution for bearish traders. This makes it prudent to wait for a sustained break below the key 105.00 psychological mark before positioning for any further near-term depreciating move for the USD/JPY pair.

Market participants now look forward to the US monthly Retails Sales figures for some impetus. Friday’s US economic docket also features the Industrial Production data and the preliminary estimate of the October Michigan Consumer Sentiment Index. This, along with the broader market risk sentiment might produce some short-term trading opportunities.

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