USD/JPY remains depressed near 106.70-75 area, below 3-week tops set on Wednesday

• USD/JPY edged lower on Thursday, snapping four consecutive days of the losing streak.
• The impasse over the US fiscal stimulus measures continued undermining the greenback.
• The prevalent cautious mood benefitted the safe-haven JPY and added to the selling bias.

The USD/JPY pair maintained its offered tone through the first half of the trading action on Thursday and was last seen hovering near daily lows, just above mid-106.00s.

The pair struggled to capitalize on its recent recovery move from five-month lows, instead faced rejection near the 107.00 mark and for now, seems to have snapped four consecutive days of the winning streak. The downtick was sponsored by a combination of factors – sustained US dollar selling bias, a fresh leg down in the US Treasury bond yields and a modest pullback in the US equity futures.

The USD remained depressed in the wake of the political deadlock over additional stimulus measures to support the economic recovery from the coronavirus pandemic. Bearish traders further took cues from a fresh leg down in the US Treasury bond yields and the prevalent cautious mood, which underpinned the safe-haven Japanese yen and contributed to the USD/JPY pair’s modest pullback on Thursday.

Despite little sign of progress in talks, investors seemed convinced that the US lawmakers will eventually reach a consensus on the stimulus measures. This, in turn, held traders from placing any aggressive bearish bets and might help limit deeper losses for the USD/JPY pair ahead of a crucial weekend meeting between the US and Chinese trade officials.

Hence, it will be prudent to wait for some strong follow-through selling before confirming that the recent positive move might have already run out of the steam and positioning for any further near-term depreciating move.

In the meantime, Thursday’s release of the US Initial Weekly Jobless Claims will influence the USD price dynamics and produce some short-term trading opportunities later during the early North American session.

Technical levels to watch