USD / JPY struggles to find direction, sideways below 109.50 ahead of US data.

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  • USD / JPY drew some buying in the dips on Thursday, although it lacked tracking.
  • Japan cuts the economic view for the first time in four months and weighed on the JPY.
  • A strong recovery in USD demand extended some support ahead of the US data.

The pair USD/JPY it balanced between tepid gains / minor losses throughout the mid-European session and was last seen trading in neutral territory, just below 109.50.

A combination of factors helped the USD / JPY draw some buying in the dips near the 109.20 zone on Thursday, although the recovery attempt was not followed up. The Japanese government cut its economic outlook for the first time in four months, which, in turn, weighed on the national currency. This, coupled with a strong rebound in demand for US dollars, extended some support to the pair.

In a monthly assessment earlier this Thursday, the government pointed to domestic and foreign virus situations as obvious downside risks to the country’s economic recovery. Among the key economic elements, the authorities lowered their opinion on private consumption for the first time in four months and production for the first time in 17 months, although they improved the opinion on housing construction.

On the other hand, expectations that the Fed would eventually begin to roll back its massive pandemic-era stimulus later this year continued to act as a tailwind for the USD. Other than this, a modest rally in US Treasury yields sustained the dollar and provided a modest rise in the USD / JPY pair. That said, the prevailing cautious mood kept any significant rises in check.

Investors remain concerned about the rapidly expanding Delta variant and a global economic slowdown. This was seen as the only factor that extended some support to the safe-haven Japanese yen and limited gains for the USD / JPY pair.

Technical levels

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