- USD/JPY is struggling to gain significant traction and remains below the weekly high.
- The modest USD weakness turns out to be a key factor acting as a headwind for the pair.
- The divergence between the policies of the Fed and the Bank of Japan, along with a positive risk tone, weighs on the JPY and offers support to the pair.
The pair USD/JPY it fails to capitalize on the previous day’s solid rebound from a nearly two-month low and swings between tepid gains and small losses on Wednesday. The pair appears to have stabilized below the weekly high and is holding stable around the 133.25 area during the first half of the European session.
The US dollar is seeing some selling amid a mixed tone around US Treasury yields., which turns out to be a key factor acting as a headwind for the USD/JPY pair. That said, the signs of stability in the stock marketscoupled with the monetary policy divergence between the Fed and the Bank of Japan, weigh on the safe-haven Japanese yen and offer some support to the pair.
It should be remembered that several Fed officials hinted that more short-term rate hikes are on the way. In contrast, the Japanese central bank has repeatedly maintained its ultra-loose stance and called for continued monetary easing in the absence of wage growth. This, in turn, supports the prospects for further appreciation of the USD/JPY pair.
However, investors seem reluctant and wait for a new catalyst before positioning themselves for the next directional move. Therefore, the focus of attention will continue to be the release of the US monthly NFP employment report on Friday. The data will play a key role in influencing the dollar and determining the short-term trajectory of the USD/JPY pair.
Meanwhile, the US services PMI will be released on Wednesday, to be released early in the American session. In addition, the US bond yield would boost demand for the dollar and give the USD/JPY pair some momentum.
USD/JPY technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
