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  • Quiet session amid US Independence holiday before NFP.  
  • US Dollar is flat versus Japanese yen and mostly higher versus commodity-link currencies.  

The USD/JPY pair is trading in a range of 10 pips around 107.80 as majors remain quiet. It reached a daily high at 107.82 and a low during the Asian session at 107.70.  

As trading activity remains subdued, attention turns to the release of the US Employment report on Friday and its potential impact on Federal Reserve rate policy expectations. Market consensus is for a reading of 160K in payrolls after the 75K reading of May, and wages are up by 0.3%.  

The market is currently fully priced in for a 25bp July rate cut and 60% priced for a 50bp cut. A notably weaker reading is likely to increase the pricing for a 50bp July rate cut, but even a firmer print should keep the market priced for one full 25bp cut in July. We expect the curve to continue steepening as the Fed delivers the first of several rate cuts in July“, wrote TDS  analysts. The 10-year yield posted the lowest close since 2016 yesterday. The US bond market is closed today. Lower yields favor the yen, but on Wednesday higher equity prices limited the slide of the pair and boosted a rebound.  

The USD/JPY shows no clear direction at the moment. It reached weekly highs on Monday boosted by the US-China agreement, but then erased all gains, retreating below 108.00. The area around 107.50 capped the downside. Price holds below key moving averages in the four hours chart that converge at 107.85/107.90; so while below the pair could be biased modestly to the downside while if it rises above 108.00, the US Dollar will likely gain momentum.