- A late recovery in the US equity markets helped bounce off lows on Thursday.
- Fed rate cut expectations kept the USD bulls on the defensive and capped gains.
- All eyes remain glued to Friday’s release of the closely watched US NFP report.
The USD/JPY pair remained depressed for the fourth consecutive session on Friday, albeit has managed to hold its neck well above one-month lows set in the previous session.
The pair extended this week’s sharp retracement slide from the vicinity of mid-108.00s and the downward momentum accelerated further on Thursday following the disappointing release of US ISM non-manufacturing PMI. The data reinforced market speculations for another interest rate cut by the Fed, which was evident from a sharp intraday slump in the US Treasury bond yields and exerted some heavily downward pressure on the pair.
The USD remains on the back-foot
The pair tumbled around 80 pips from intraday tops but managed to find some support near mid-106.00s on the back of a late rebound in the US equity markets, which dented the Japanese Yen’s safe-haven status. However, the prevalent US Dollar selling bias, despite a modest pickup in the US bond yields, and initial stability in the global risk sentiment, failed to impress bulls or provide any meaningful impetus to the major.
Given that the employment sub-component of Thursday’s ISM report fell sharply to 50.4, expectations that the headline non-farm payrolls figure is more likely to come on the disappointing side seemed to be one of the key factors holding investors from placing any bullish bets. Hence, it will be prudent to wait for a strong follow-through buying before confirming that the pair might have bottomed out and traders start positioning for any near-term appreciating move.
Technical levels to watch
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