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  • Concerns about global growth continue to benefit the JPY’s relative safe-haven status.
  • Sliding US bond yields/Fed rate cut expectations kept the USD bulls on the defensive.
  • Traders now look forward to the US ISM non-manufacturing PMI for some impetus.

The USD/JPY pair showed some resilience below the 107.00 handle and quickly recovered around 30 pips from 1-1/2 week lows, set earlier during the Asian session on Thursday.
 
The pair extended this week’s sharp retracement slide from the vicinity of mid-108.00s and remained depressed through the Asian session on Thursday amid growing concerns about slowing global economic growth, which continued underpinning the Japanese Yen’s relative safe-haven status.

Finds some support amid stability in financial markets

The global flight to safety was further reinforced by the ongoing slide in the US Treasury bond yields to the lower level since September 9. This coupled with firming expectations for yet another interest rate cut by the Fed weighed on the US Dollar and exerted some additional pressure.
 
It is worth recalling that Monday’s dismal US manufacturing data re-ignited worries of a US recession and forced investors to start pricing in additional Fed policy easing. In fact, the fed funds futures market now points to a 64.7% chance of a 25 bps rate cut at the upcoming FOMC meeting in October.
 
However, bulls showed some resilience near the last week’s swing lows, around the 106.95 region, amid some initial signs of stability in the global financial markets. This was evident from a modest recovery in the US equity indices futures, which helped the pair to climb to fresh session tops, around the 107.25 region.
 
Moving ahead, Thursday’s US economic docket – highlighting the release of ISM non-manufacturing PMI – might produce some short-term trading opportunities later during the early North-American session, though the key focus will remain on Friday’s official US monthly jobs report – NFP.

Technical levels to watch