- A combination of factors helps USD / JPY make a modest bounce from multi-week lows.
- Risk appetite weighs on the safe-haven JPY and continues to support the pair’s upward move.
- A rally in US bond yields provides additional boost, while a weaker USD limits the rise.
The pair USD/JPY has moved to new daily highs, around the region of 108.55, at the start of the European session on Tuesday, recovering a part of the losses the day before. At time of writing, the pair is slightly backing up from that level, but is still positive on the day around 108.40.
After showing some resistance below the 108.00 level, the pair has made a modest recovery from seven-week lows and it has been supported by a combination of factors. The Underlying bullish sentiment in financial markets has weighed on demand for the Japanese yen as a safe haven. The pair’s bulls have also taken signs of a rebound in US Treasury yields, although the prevailing sell bias around the US dollar could limit the gains of the USD / JPY pair.
The USD remained under pressure near the lowest level since early March amid speculation that the Fed will keep interest rates low for a longer period. Investors now seem convinced by the Fed’s view that any spike in inflation is likely to be transitory and they have been lowering expectations of an earlier monetary policy tightening. This, coupled with fears about another dangerous wave of coronavirus infections, could prevent bulls from opening aggressive positions.
In the absence of major economic releases from the US, it will be prudent to wait for strong continuation buying before confirming that the USD / JPY has bottomed out. Having said that, the bias remains skewed in favor of the bears and supports prospects for an extension of the recent pullback from the one-year highs.
Therefore, any subsequent positive movement could still be seen as a selling opportunity and remain capped near the 109.00 region. The aforementioned level represents the breaking point of a confluence support, comprising the 200-period SMA on the 4-hour chart and the 23.6% Fibonacci retracement of the strong bullish move from 102.59 to 110.97, which should now act as a main point.
USD / JPY technical levels
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