- A combination of divergent factors does not provide any boost to USD / JPY on Friday.
- Covid-19 concerns and risk-off sentiment benefit the safe-haven JPY and limit the pair’s gains.
- Expectations that the Fed will start to reduce its bond buying soon act as a tailwind for the USD.
The pair USD/JPY it lacks a firm directional bias and ranges from timid gains to minor losses at the start of the European session on Friday. At the time of writing, the pair remains close to its daily lows in the region of 109.60.
After the previous day’s sharp decline from the 110.20-25 region, at weekly highs, the USD / JPY pair has witnessed subdued and range-bound price action on the last day of the week. The prevailing risk aversion feeling – amid lingering nerves over COVID-19 – has continued propping up the safe-haven Japanese yen and it has limited the rise of the pair.
The global flight to safe haven has been reinforced by a modest drop in US Treasury yields, which has kept the US dollar bulls on the defensive. This has been seen as another factor that has acted as a headwind for the USD / JPY pair. That said, prospects for the Fed to roll back its pandemic-era stimulus have offered some support to the USD.
The minutes of the last FOMC meeting held July 27-28 appear to have convinced investors that the Fed is now comfortable to begin reducing its massive asset purchase program later this year. Those responsible for formulating monetary policies considered that the benchmark of more substantial progress in terms of inflation and maximum employment has been met.
The combination of divergent factors has prevented investors from opening aggressive positions amid the absence of relevant economic releases on Friday. Looking ahead, the focus is now on the Jackson Hole Symposium scheduled for August 26-28. Meanwhile, broader market risk sentiment and USD price dynamics could provide some boost to the USD / JPY pair.
USD / JPY technical levels
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