- USD/JPY moves lower on Friday and gives back a part of the previous day’s strong recovery move.
- The DXY dollar index retraces from its highest level since June 2020 and puts downward pressure on the pair.
- Cautious optimism could weigh on the safe-haven JPY and limit deeper losses in the pair.
The pair USD/JPY remains under pressure during the European session on Friday, falling to a daily low near the region of 115.20 and giving back a part of the previous day’s strong recovery movement.
The pair struggled to capitalize on the intraday rally of almost 130 pips from the 114.40 zone, or the three-week low, and found new sales on the last day of the week. The movement could be attributed only to the current retreat of the US dollar from the highest level since June 2020played in reaction to the Russian invasion of Ukraine on Thursday.
Despite recent geopolitical events, the fact that the new economic sanctions on Russia were not as harsh as feared weighed on the USD as a global reserve currency. This, in turn, was seen as a key factor putting some downward pressure on the USD/JPY pair, although the decline seems supported amid optimism over the Putin-Zelenskyy meeting on a likely ceasefire.
The press secretary of the Russian president, Dmitry Peskov, has said that Putin was ready to talk to Ukrainian President Volodymyr Zelenskyy if the latter agrees to engage in Russia’s red line affairs.. Additionally, reports indicated that Russian troops have stopped advancing in most directions. This could weigh on the safe-haven Japanese yen and lend support to the USD/JPY pair.
That said, the risk of a new escalation in the conflict between Russia and the West over Ukraine should keep investors on the sidelines. The mixed fundamental backdrop warrants some caution for aggressive investors before positioning themselves for a strong short-term direction in the USD/JPY pair. Therefore, the market focus will remain glued to the new developments surrounding the conflict between Russia and Ukraine.
Market participants now await the US economic calendar, highlighted by the release of the Fed’s preferred inflation gauge, the core PCE price index, and durable goods orders. However, the data is likely to be overshadowed and would do little to influence price dynamics or provide any significant boost to the USD/JPY pair.
USD/JPY technical levels
Source: Fx Street
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