- A modest USD rebound offers some support for USD / JPY on Thursday.
- The disappearance of safe haven demand weighs on the JPY and continues to be supportive for the pair.
- Nervousness around COVID-19 and pessimistic expectations from the Fed could limit any significant gains.
The pair USD/JPY is extending its side consolidation price action at the start of Thursday’s European session and remains trapped within a narrow range just below the 104.00 level.
The pair has managed to find some support near the 103.65 region and for now, appears to have halted its recent decline seen over the past week. The modest rally during the first half of trading action on Thursday is due to some short-covering movement in the US dollar.
Apart of this, a positive tone in US stock market futures has weighed on the safe-haven Japanese yen and has provided a slight boost to the USD / JPY pair. That said, pessimistic expectations from the Fed have prevented the pair’s bulls from opening aggressive positions and limited any significant rally for the pair.
The concerns about the economic consequences of the imposition of new restrictions in several US states have overshadowed the latest optimism about a possible coronavirus vaccine. This, in turn, has fueled expectations of further monetary stimulus from the Fed.
This has been evident by a further downward movement in US Treasury yields, which should limit the USD recovery attempt. Therefore, a subsequent move above the 104.00 level could still be seen as a selling opportunity and risks quickly disappearing near the 104.30-35 region.
Market participants are now awaiting the US economic calendar, which features the Philadelphia Fed Manufacturing Index releases and initial weekly jobless claims. Price action will also follow developments related to the coronavirus saga and overall market risk sentiment.
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