- The decreased risk appetite benefits the safe haven JPY and puts some pressure on the USD / JPY.
- Falling US bond yields keeps dollar bulls on the defensive and contributes to the pair’s selling bias.
- The lack of continuation in selling warrants some caution for aggressive bears.
The pair USD/JPY moves with a slight negative bias at the start of the European session on Thursday, although has managed to comfortably stay above the key psychological level of 105.00. At time of writing, the pair remains negative on the day around the 105.30 region, recovering from the daily lows of 105.13.
The pair has continued its struggle to take advantage of this week’s strong rebound, from the 103.00 region at multi-month lows, and has been oscillating within a narrow trading range for the past three days negotiation. Concerns about the economic consequences of the continued increase in new cases have limited recent optimism about a possible vaccine for COVID-19.
This has been evident from a modest pullback in stock market futures from the USA, which has benefited the demand for the Japanese yen safe haven and triggered some selling around USD / JPY on Thursday. The bears have taken cues of a sharp drop in US Treasury yields, which has kept the US dollar bulls on the defensive and contributed to the softer tone of the pair.
Meanwhile, the imposition of new stricter restrictions in several states of the United States seems to have revived the Hopes for additional fiscal stimulus measures to support the economy. This could become another factor that could weigh on the dollar and put some pressure on the USD / JPY pair. However, the lack of continuation in selling warrants some caution for bears.
Market participants are now awaiting US macroeconomic data for further momentum. Featured on Thursday’s US economic calendar are the latest consumer inflation figures and initial weekly jobless claims. This, along with the broader market risk sentiment, will influence the USD / JPY pair and could lead to some significant trading opportunities.
Credits: Forex Street
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