USD / JPY with limited runs, supported at 103.60

• USD / JPY falls for the second day in a row on Friday, but remains above weekly lows.
• The main Wall Street indices point to a negative open.
• Fall in Treasury yields favors the yen.

USD / JPY posted small daily losses on Thursday and continued to push lower on Friday, as equity markets and U.S. Treasury yields fell. The decline is being moderate, with rallies limited in par. It is trading 103.70 / 75, less than 10 pips below Thursday’s close.

The attention on Wall Street and in data

On Thursday, dovish comments from FOMC Chairman Jerome Powell had a mixed impact on the dollar. Something similar happened with the economic announcements of President-elect Joe Biden. The lack of surprises did not have an impact on market expectations, where it seems that both speeches were already discounted in prices.

The Treasury yields are falling on Friday, contributing to the strength of the yen. USD / JPY remains relatively stable with a bearish bias, despite the dollar’s rise on all fronts. The DXY is in the 90.50 zone, close to the weekly highs.

The negative risk climate favors both the dollar and the yen. Wall Street futures point to a negative open, with falls around 0.35%. Traders’ eyes will continue to watch closely what happens to bonds and Wall Street. In addition, the economic calendar shows several data from the US ahead, with retail sales standing out in less than half an hour.

Short-term outlook

From a technical point of view, the weakness of the USD / JPY will remain limited as long as the pair continues above 103.50. A drop below would trigger a more significant decline. On the upside, the first resistance appears at 103.85, and then it will follow 104.00. A daily close above 104.65 would be a positive sign for the dollar. ahead, as it would be breaking a bearish line and returning above the 200-day moving average.