USD/JPY rebounds from weekly low, holds below 130.00 ahead of US Q4 GDP.

• USD/JPY reverses an intraday slide to a new weekly low, though it lacks continuation.
• A slightly positive tone weakens the safe-haven JPY and lends support to the pair.
• Expectations of lower Fed rate hikes keep dollar bulls on the defensive and cap gains for the pair.
• Investors may also prefer to stay on the sidelines and wait for the fourth quarter US GDP release.

The pair USD/JPY finds some support near the 129.00 level and recovers around 70-80 pips from the weekly low hit earlier this Thursday. The pair has rallied to a fresh daily high during the early part of the European session, although it seems to be has difficulty taking advantage of the move and remains below the psychological level of 130.00.

A combination of factors weakens the Japanese yen (JPY), which in turn offers some support to the USD/JPY pair. The Bank of Japan (BoJ), in its summary of opinions published this Thursday, has stated that wants to maintain the current monetary policy setting, including Yield Curve Control (Y.C.C.). This, along with a slightly positive tone around equity markets, is keeping some money flows away from the safe-haven JPY.

Meanwhile, the new Speculation that high inflation may prompt the Bank of Japan to take a more aggressive stance at the end of the year they help limit the yen’s losses. The dollar, for its part, weakens near eight-month lows against the prospects for a less aggressive tightening of monetary policy by the Fed and the increase in expectations for a rate hike of 25 basis points in February. This, in turn, acts as a headwind for the USD/JPY pair and limits the pair’s upside.

Traders are also looking reluctant, preferring to wait on the sidelines before the US Advanced Q4 GDP is released later in the American session. Also on Thursday’s agenda will be durable goods orders and new home sales, which could influence dollar price dynamics.

USD/JPY technical levels