USD/JPY trades in the negative territory below 108.50

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  • 10-year US Treasury bond yield consolidates this week’s gains.
  • Wall Street looks to open the day modestly higher.
  • US Dollar Index posts small losses near the 97 mark.

The USD/JPY pair is trading in a tight range on Friday and struggles to set its next short-term direction as the rising US Treasury bond yields make it difficult for the JPY to find demand and take advantage of the broad USD weakness. Reflecting the neutral outlook, the pair stays flat on the weekly chart and was last seen trading at 108.30, losing 0.15% on the day.

After falling for eight straight weeks and slumping to its lowest level since November 2016 below the 2% mark last week, the 10-year US Treasury bond yield staged a strong recovery that started last Friday on the back of upbeat employment figures and rose nearly 9% since then, weighing on the traditional safe-haven assets such as the JPY.

On the other hand, FOMC Chairman Powell’s cautious remarks earlier this week forced the dollar to weaken against its major rivals and dragged the US Dollar Index below the 97 mark. Although the DXY gained traction and retraced a small portion of its losses after yesterday’s inflation report showed that the core Consumer Price Index rose to 2.1% on a yearly basis in June to beat the market expectation of 2%, it struggled to preserve its momentum and didn’t allow the pair to turn north.

Later in the session, the Producer Price Index (PPI) data from the U.S. will be looked upon for fresh impetus. Moreover, investors will be paying attention to Wall Street’s performance. The modest gain seen in the S&P 500 Futures hints that major indexes are likely to start the day in the positive territory.

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