- A combination of factors assisted USD/JPY to gain traction for the third straight session.
- The USD built on the overnight bounce from two-year lows, led by upbeat US macro data.
- The risk-on mood undermined the safe-haven JPY and remained supportive of the move.
The USD/JPY pair maintained its bid tone through the mid-European session and was last seen hovering near weekly tops, around the 106.20-25 region.
Following the previous day’s good two-way price swings, the pair caught some fresh bids on Wednesday and prolonged this week’s positive move for the third consecutive session. The momentum was sponsored by some follow-through US dollar buying interest and the upbeat market mood, which tends to undermine the safe-haven Japanese yen.
The greenback remained well supported by Tuesday’s upbeat US macro data, which showed that the manufacturing sector activity accelerated to the highest level since November 2018 and revived hopes for the US economic recovery. This coupled with a strong pickup in the US Treasury bond yields led to some near-term USD short-covering move.
On the other hand, the prevalent risk-on environment – as depicted by a bullish tone around the global equity markets – drove investors away from traditional safe-haven assets. This, in turn, weighed on the Japanese yen and remained supportive of the USD/JPY pair’s bid tone, taking along some intraday trading stops near the 106.00-10 region.
It, however, remains to be seen if bulls are able to capitalize on the move or the USD/JPY pair meets with some fresh supply at higher levels. The Fed’s new policy framework last week fueled speculations that rates would stay lower for longer. This might hold the USD bulls from placing any aggressive bets and keep a lid on any further gains.
Moving ahead, market participants now look forward to the US ADP report on private-sector employment. The data might influence the USD price dynamics and produce some short-term trading opportunities. The key focus will remain on Friday’s release of the closely watched US monthly jobs report – popularly known as NFP.
Technical levels to watch
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