- USD / JPY is witnessing a modest pullback from the five-month highs set earlier this Wednesday.
- The pullback lacks an obvious catalyst and could be attributed to some profit taking.
- A combination of factors offers some support and helps limit deeper losses.
The pair USD/JPY remains practically unchanged on the day at the start of the European session, around the 106.00 level, after hitting a new multi-month high around 106.20 earlier in the day.
The pair has built on the previous day’s move above the 106.00 level and gained some positive traction during the first half of the Asian session on Wednesday. Momentum has pushed the USD / JPY pair to the highest level since September 2020, although it has run out of steam near the 106.20-25 area.
The USD / JPY pair, for now, seems to have stopped five consecutive days of winning streak. The pullback could be attributed to some profit taking amid mild overbought conditions on short-term charts. Bears also took a softer tone around US Treasury yields.
That said, a combination of factors has prevented bears from opening aggressive positions and has helped the USD / JPY pair to attract some buying near the 105.85 zone. The US dollar has extended the gains from the previous day’s recovery move and is likely to offer some support to the pair..
Apart of this, optimism about a strong global economic recovery, amid progress in launching the vaccine for COVID-19, could continue to affect Japanese yen demand for safe haven. This, in turn, should further contribute to limiting any significant corrective decline in the USD / JPY pair.
Therefore, it will be prudent to wait for continued selling before confirming that the USD / JPY pair could have peaked in the near term. Market participants are now awaiting the release of the US monthly retail sales data to get some short-term business opportunities at the start of the American session.
USD / JPY technical levels
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