USD/JPY struggles near mid-109.00s, over one-week lows ahead of Powell’s speech
|- USD/JPY came under renewed selling pressure on Thursday and dropped to over one-week lows.
- A softer tone surrounding the USD, US bond yields exerting some downward pressure on the pair.
- The upbeat US economic outlook should help limit losses ahead of Fed Chair Powell’s speech.
The USD/JPY pair maintained its offered tone through the mid-European session and was last seen hovering around mid-109.00s, just above one-and-half-week lows.
The pair failed to capitalize on the previous day's modest bounce and faced rejection near the key 110.00 psychological mark amid some renewed US dollar selling bias. Bearish traders further took cues from the recent sharp pullback in the US Treasury bond yields and a cautious mood around the equity markets, which tends to benefit the safe-haven Japanese yen.
Despite the negative factors, the downside seems limited amid the prospects for a relatively faster US economic recovery from the pandemic, thanks to the impressive pace of coronavirus vaccinations. This, along with US President Joe Biden's over $2 trillion infrastructure spending plan, has been fueling speculations about a possible uptick in US inflation.
This, in turn, raised doubts that the Fed will retain ultra-low interest rates for a longer period. Wednesday's FOMC meeting minutes reiterated the Fed's commitment to keeping interest rates low and forced investors to reassess their expectations. That said, the markets have been betting on an earlier than anticipated policy tightening amid the optimistic US economic outlook.
Hence, the focus now shifts to Fed Chair Jerome Powell's scheduled speech later during the US session. His comments will be closely scrutinized for fresh clues about the policy outlook, which will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the USD/JPY pair.
In the meantime, Thursday's US economic docket – featuring the only release of the usual Initial Weekly Jobless Claims – will be looked upon for some impetus during the early North American session. Apart from this, the broader market risk sentiment and the US bond yields would further contribute to produce some trading opportunities around the USD/JPY pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.