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USD / JPY with modest gains below 109.50, lacks continuation

  • Risk appetite affects the safe haven JPY and helps USD / JPY gain some positive traction.
  • Pessimistic expectations from the Fed and falling US bond yields keep USD bulls on the defensive and limit the pair’s gains.

The pair USD/JPY moves with a slight positive bias at the start of the European session on Friday, although it lacks continuation buying and remains capped below the 109.50 region.

Following the sharp pullback the day before from weekly highs, the pair has managed to regain some positive traction on the last trading day of the week. The rebound has been seen supported by underlying bullish sentiment in financial markets, which tends to weigh on the demand for the Japanese yen as a safe haven. That said, a combination of factors has limited any significant rally for the USD / JPY pair.

Despite Thursday’s warmer-than-expected US CPI figure, investors appear to be in line with the Fed’s narrative that any increase in inflation is likely to be transitory. This means that the Fed will maintain its ultra-flexible policy stance for a longer period.. Aside from this, a further drop in US Treasury yields has weighed on the US dollar and prevented the bulls from opening aggressive new positions around the USD / JPY.

Therefore, the focus of the market’s attention now shifts to the next FOMC monetary policy meeting on June 15-16.

Meanwhile, US bond yields will continue to play a key role in influencing USD price dynamics. Investors will follow the broader market risk sentiment indications and the release of the University of Michigan’s preliminary consumer sentiment index, to be released at the start of the American session today, for some short-term opportunities.

USD / JPY technical levels

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