USD / JPY struggles to make a convincing bounce, remains calm above 108.00

• USD / JPY is moving sideways slightly above 108.00 on Wednesday.
• The US dollar index extends the rebound to the second day in a row.
• The yield on 10-year US treasuries is slowly climbing after Tuesday’s slide.

After posting small daily losses on Tuesday, the pair USD/JPY it fell to its weakest level since early March at 107.88 on Wednesday. However, in the absence of significant fundamental drivers, the pair made a technical correction and was last seen trading flat at 108.10.

The sharp drop seen in the major Wall Street indices helped the dollar find demand on Tuesday. The US Dollar Index (DXY) snapped a two-day losing streak and gained 0.15%. However, USD / JPY struggled to gain traction as the benchmark 10-year US Treasury yield lost more than 3%.

Currently, the DXY continues to creep up and the US 10-year bond yield clings to recovery gains at 1,568%, helping the USD / JPY stay in positive territory.

Meanwhile, the latest reports from Japan suggest that the government is considering declaring a state of emergency for Tokyo and Osaka amid rising coronavirus infections.

No major US macro data will be released for the remainder of the day and S&P 500 futures are flat, suggesting that market sentiment will not be able to provide a directional clue either.

Short-term outlook for USD / JPY

When assessing the possible movements of the USD / JPY in the next 1-3 weeks, “the USD is likely to weaken further, but the main support at 107.65 may not appear so soon,” analysts at the UOB Group said. “On the upside, a breakout of 108.85 (no change at the ‘strong resistance’ level) would indicate that the pullback in the USD that started about 2 weeks ago has run its course. Looking ahead, the next support below of 107.65 is at 107.30 “.

Additional levels