- USD / JPY struggles to find firm direction and remains trapped within a range on Friday.
- Falling US bond yields keeps USD bulls on the defensive and limits the pair’s rally.
- Risk appetite and COVID-19 nervousness in Japan weighs on the JPY and helps limit losses.
The pair USD/JPY moves slightly lower during the European session on Friday, but remains trapped within a narrow range below the 109.00 level.
A combination of divergent factors has failed to provide significant momentum to the pair and led to moderate and range-bound price action during the first half of trading action on Friday. Despite the optimistic minutes from the FOMC on Wednesday, US dollar remains weak near multi-month lows amid expectations that the Fed will maintain its accommodative policy stance for a longer period.
This has been evident by a softer tone around US Treasury yields, which has turned out to be one of the key factors that has not helped the USD / JPY pair gain traction. Having said that, the decline remains supported, at least for the moment, amid the prevailing sentiment of risk appetite on global stock markets, which tends to weigh on demand for the Japanese yen as a safe haven.
Apart of this, Concerns that increased COVID-19 cases and the imposition of lockdown measures could hamper Japan’s fragile economic recovery they have extended some more support to the USD / JPY pair. On Friday, medical experts approved the government’s proposal to add the southern prefecture of Okinawa, bringing the list to 10 prefectures that are subject to the strictest emergency measures.
Therefore, it will be prudent to wait for a solid continuation of the selling before positioning for any further bearish movement. Market participants now await the release of preliminary US PMI figures for May. This, along with US bond yields, will influence the USD. Investors will follow the signs of broader market risk sentiment for some short-term opportunities.
USD / JPY technical levels
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