- USD/JPY attracted dip-buying on Thursday and stalled its corrective slide from multi-month tops.
- A combination of factors might hold bulls from placing aggressive bets and cap gains for the pair.
- Sliding US bond yields undermined the USD and the cautious mood benefitted the safe-haven JPY.
The USD/JPY pair managed to reverse an Asian session dip and was last seen hovering near the top end of its daily trading range, just below the 106.00 mark.
The pair attracted some dip-buying near the 105.70 region and for now, seems to have stalled its corrective slide from five-month tops, touched in the previous session. The uptick, however, lacked any obvious fundamental catalyst and is more likely to remain limited amid a combination of factors.
A modest pullback in US Treasury bond yields held the US dollar bulls from placing fresh bets. Apart from this, a cautious mood around the equity markets could underpin the safe-haven Japanese yen. This, in turn, might keep a lid on any meaningful upside for the USD/JPY pair, at least for now.
That said, the optimism that the US economy will see a faster recovery than its global peers supports prospects for an extension of the recent bullish trajectory. Wednesday’s upbeat US monthly Retail Sales data for January was seen as the latest sign of strength in the US economic outlook.
This comes amid the impressive pace of COVID-19 vaccinations, the slowing pace of infections and progress on the US President Joe Biden’s proposed $1.9 trillion stimulus package. Hence, any meaningful slide might still be seen as an opportunity to initiate fresh bullish positions.
Market participants now look forward to the US economic docket, featuring the release of Philly Fed Manufacturing Index, the usual Initial Weekly Jobless Claims and housing market data. This, along with the US bond yields, might influence the USD and provide some impetus to the USD/JPY pair.
Technical levels to watch
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