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  • USD/JPY witnessed a modest pullback from two-month tops, levels beyond 109.00 mark.
  • Worsening US-China relations benefitted the safe-haven JPY and exerted some pressure.
  • The post-ECB strength around the euro weighed on the USD and added to the selling bias.

The USD/JPY pair extended its steady intraday pullback from near two-month tops and refreshed daily lows, around the 108.60 region in the last hour.

The pair failed to capitalize on its early uptick, rather struggled to find acceptance above the 109.00 round-figure mark and witnessed a modest pullback from the highest level since April 7. Worsening US-China relations forced investors to take refuge in safe-haven currencies and benefitted the Japanese yen, which turned out to be a key factor exerting some pressure on the USD/JPY pair.

Tensions between the world’s two largest economies escalated further after the US suspended passenger flights to and from the country by Chinese airlines effective from June 16. This came in response to the dragon nation’s earlier move to bar American carriers from re-entering China and kept a lid on the recent optimism over a sharp V-shaped global economic recovery from the coronavirus pandemic.

On the other hand, the post-ECB strong buying around the shared currency prompted some aggressive US dollar selling during the early North American session. Some renewed USD weakness further contributed to the USD/JPY pair’s intraday slide of over 50 pips. Despite the fall, the pair has still managed to hold above the very important 200-day SMA and thus, warrants some caution for bearish traders.

On the economic data front, the US Initial Weekly Jobless Claims came in at 1.877 million for the week that ended May 30th. This was slightly higher than consensus estimates pointing to a 1.8 million and did little to impress the USD bulls.

Moving ahead, market participants now start repositioning for Friday’s release of the US monthly jobs report. The closely watched NFP report will now play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the USD/JPY major.

Technical levels to watch