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  • USD/JPY gained some traction on Friday amid a modest pickup in the USD demand.
  • Renewed worries about US-China tensions kept a lid on any further gains for the pair.
  • The US commerce secretary Wilbur Ross confirmed the move to blacklist China’s SMIC.

The USD/JPY pair trimmed a part of its intraday recovery gains, albeit has still managed to hold in the positive territory, around the 103.30-25 region.

The pair gained some positive traction on the last trading day of the week and staged a goodish bounce from nine-month lows, or sub-103.00 levels touched on Thursday. The uptick was supported by a modest pickup in the US dollar demand and the underlying bullish sentiment, which tends to undermine the Japanese yen’s safe-haven demand.

Given that the US congressional negotiators are yet to agree over a new coronavirus-relief package, the US dollar witnessed some short-covering bounce on Friday. Meanwhile, the global risk sentiment remained well supported by the latest optimism over the rollout of vaccines for the highly contagious coronavirus diseases.

The supporting factors, to a larger extent, were offset by reports that the US is set to add dozens of Chinese companies to a trade blacklist. In fact, the US commerce secretary, Wilbur Ross confirmed that the US has moved to blacklist China’s top chipmaker SMIC, resurfacing worries about an escalation of tensions between the world’s two largest economies.

Apart from this, Britain and the European Union struck a downbeat tone about the likelihood of a post-Brexit trade deal. This, in turn, further held investors from taking aggressive risks and kept a lid on any strong gains for the USD/JPY pair. The lack of any follow-through buying suggests that the near-term bearish trend might still be far from over.

There isn’t any major market-moving economic data due for release from the US on Friday. Hence, the key focus will remain on the US stimulus headlines, which might influence the USD price dynamics. This, along with the broader market risk sentiment, will also be looked upon to grab some short-term trading opportunities.

Technical levels to watch