- Revival in demand for the safe haven JPY triggers further selling around USD / JPY on Wednesday.
- Falling US bond yields keeps USD bulls on the defensive and contributes to the pair’s selling bias.
- The drop appears limited as investors stay on the sidelines ahead of Thursday’s US CPI report.
The pair USD/JPY moves slightly lower during the European session on Wednesday, trading just below the 109.50 level.
The pair has struggled to capitalize on the good bounce the day before from the 50-day simple moving average and encountered fresh selling on Wednesday, pressured by a combination of factors. The prevailing feeling of caution in the markets has been seen as a key factor that has offered some support to the safe-haven Japanese yen and it has caused some selling around the USD / JPY pair.
The bears have followed the signs of the current decline in US Treasury yields, which has kept the dollar bulls on the defensive. That being said, concerns that Rising inflationary pressures could force the Fed to initiate discussion on reducing its bond purchases have acted as a tailwind for the dollar. This, in turn, has helped limit the losses of the USD / JPY pair.
Therefore, the key focus of attention will remain Thursday’s release of the latest US consumer inflation figures. This will be another important macroeconomic data that will set the tone for the FOMC meeting on June 15-16. In addressing the risk of key data, investors’ reluctance to open aggressive positions could also offer some support to the USD / JPY pair, at least for the time being.
Meanwhile, US bond yields will play a key role in influencing USD price dynamics amid the absence of relevant economic releases on Wednesday. Apart from this, the broader market risk sentiment could generate some momentum to the USD / JPY pair and allow investors to seize some short-term opportunities.
USD / JPY technical levels
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