USD / JPY clings to gains near daily highs around 109.75-80 region

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  • USD / JPY captures some new buying on Thursday amid a good recovery in USD demand.
  • The recovery in US bond yields provided a modest boost to the USD and continued to support the pair’s upward move.
  • Softer risk sentiment could prop up the safe-haven JPY and limit any further gains in the pair.

The pair USD/JPY moves higher during the European session on Thursday, staying close to daily highs around the 109.75-80 region.

Following the previous day’s retracement of around 35 pips from near weekly highs, the pair has regained positive traction on Thursday and has been supported by a combination of factors. Concerns that the recent surge in COVID-19 cases could hamper Japan’s fragile economic recovery it has acted as a headwind for the Japanese yen. In the latest development, Japan has extended the state of emergency in Tokyo and eight other prefectures in about 3 weeks until June 20.

On the other hand, the US dollar has found some support thanks to a good recovery in bond yields from the US Treasury. This has been seen as another factor that has contributed to the buying tone around the USD / JPY pair. Investors have been nervous about whether surprisingly stronger US economic data could force the Fed to raise interest rates sooner rather than later. This, in turn, has prompted some reversal of bearish USD expectations ahead of the NFP report release on Friday.

This could set the tone at the next FOMC meeting later this month, which will play a key role in influencing USD price dynamics and could provide new directional momentum. Meanwhile, US macroeconomic data on Thursday could generate for some short-term trading opportunities. The US economic calendar includes the release of the ADP report on private sector employment, initial weekly jobless claims, and the ISM services PMI.

In the meantime, a softer tone around stocks could extend some support to the safe-haven JPY. This, in turn, could be the only factor limiting the gains of the USD / JPY pair, at least for the moment. Therefore, it will be prudent to wait for some solid continuation buying, possibly above the key psychological 110.00 level, before positioning for any further bullish movement.

USD / JPY technical levels

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