- USD / JPY makes a modest bounce from the one-week lows previously touched on Wednesday.
- The rally lacks any obvious fundamental catalyst and is more likely to remain limited.
- Risk-off sentiment could benefit the safe-haven JPY and limit the rise amid the slide in US bond yields.
- USD bulls remain on the defensive ahead of the highly anticipated FOMC minutes.
The pair USD/JPY has managed to recover around 30-35 pips from lows of more than two weeks touched during the Asian session and is moving with modest gains, near the 110.70-75 region, at the start of the European session on Wednesday.
The pair has captured some purchases near the 110.40 region Wednesday and for now, it appears to have halted its recent pullback from the yearly highs, around the 111.65 zone touched last week. The USD / JPY pair has moved into positive territory for the first day in the previous four, although a combination of factors could limit any further gains.
The concerns about the spread of the Delta variant highly contagious coronavirus have continued to weigh on investor sentiment. This has been evident from the cautious mood prevailing in stock markets, which could prop up the safe-haven Japanese yen. This, coupled with a subdued demand for the US dollar, could further help limit the rise in the USD / JPY pair.
Dollar bulls have struggled to capitalize on the good move the day before amidst the expectations that the Fed will wait longer before reducing its asset purchases or raising interest rates. Therefore, the market focus will remain on the release of the minutes of the June FOMC meeting, which will be scrutinized for clues on the US central bank’s monetary policy outlook.
Apart of this, a weaker tone around Treasury yields The US has been seen as another factor that has acted as a headwind for the USD. This makes it prudent to wait for some continuation buying before confirming that the USD / JPY pair could have bottomed out in the short term and positioned for any further bullish movement.
USD / JPY technical levels
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