- Risk appetite weighed on the safe-haven JPY and helped the USD / JPY gain some traction.
- The appearance of a more tone around the USD and US bond yields limited the rise.
- The lack of solid continuation buying warrants caution before opening new bullish positions.
The pair USD/JPY moved with a slight positive bias during early trading action on Thursday, although it lacked a strong follow-on buy and held capped below the 109.50 level. At the time of writing, the pair has returned all of its initial earnings and falls to daily lows around the region e 109.10.
The pair has gained some positive traction during the first half of Thursday’s trading action and has seen supported by prevailing sentiment of risk appetite, which tends to weigh on the safe-haven Japanese yen. Hopes for a robust global economic recovery from the pandemic have continued to support underlying bullish sentiment in financial markets.
Apart of this, Concerns that the recent spike in COVID-19 cases could hamper Japan’s fragile economic recovery It has also acted as a headwind for the JPY and has offered some support for the USD / JPY pair. Earlier this Thursday, Tokyo Governor Yuriko Koike said that the Japanese capital is not at a stage where it can afford to lift the measures of the state of emergency.
Supporting factors, to a greater extent, have been seen offset by the emergence of new sales around the US dollar. This, in turn, has prevented the bulls from opening aggressive positions and limited any significant rally for the USD / JPY pair. The USD has fallen further from the two-week highs set on Wednesday and has been hit by pessimistic expectations from the Fed.
Wednesday’s rather unimpressive US macroeconomic releases, ISM’s ADP report and Services PMI, bolstered the market opinion that the Fed will keep interest rates low for a longer period. This, coupled with a softer tone around US Treasury yields, it has weighed further on the USD and warrants caution before positioning for further gains in the pair.
Investors might also prefer to wait on the sidelines before the release of the US monthly NFP jobs report on Friday. This can provide clues as to when the Fed would reduce its stimulus, which, in turn, should help investors determine the next directional move for the USD / JPY pair.
Meanwhile, Thursday’s release of initial data for weekly US jobless claims could generate some momentum. Apart from this, US bond yields could influence the USD and give the USD / JPY some boost. Investors could follow the signs of broader market risk sentiment to seize some short-term opportunities.
USD / JPY technical levels
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