USD/JPY Analysis: Stuck in a range near multi-week lows, around 38.2% Fibo. level

The USD/JPY pair extended its sideways consolidative price action and remained depressed near multi-week lows through the Asian session on Friday. The pair, so far, has been struggling to gain any meaningful traction and oscillating in a range over the past four trading session. Renewed fears about another dangerous wave of coronavirus infections in some countries continued weighing on investors' sentiment and benefitting the safe-haven Japanese yen. This, in turn, was seen as a key factor that capped the upside for the major.

On the other hand, the US dollar languished near multi-week lows amid the growing market conviction that the Fed will keep interest rates near zero levels for a longer period. The greenback did get a minor lift following the release of better-than-expected Thursday's better-than-expected Jobless Claims data, though did little to provide any meaningful impetus to the major. In fact, the number of Americans filing for unemployment-related benefits declined to 547K last week as against the 617K expected and the 586K previous.

Meanwhile, the already weaker sentiment took an additional hit from reports that the Biden administration is seeking an increase in the capital gains tax for wealthy individuals to near 40%, almost double from the current base rate of 20%. The plan is part of the White House's push for a sweeping overhaul of the US tax system to make rich people and big companies pay more and help foot the bill for Biden's ambitious economic agenda. This was seen as another factor that kept bulls on the defensive through the first half of the trading action on Friday.

That said, a calmer US fixed income market – as depicted by signs of stability in the US Treasury bond yields – held bearish traders from placing aggressive bets. This comes amid worries about a surge in severe cases of COVID-19 mutant strains in Japan. Prime Minister Yoshihide Suga is set to declare a fresh state of emergency in Tokyo as well as Osaka, Kyoto and Hyogo prefectures on Friday. The development should lend some support to the pair and help limit any deeper losses, at least for the time being.

Market participants now look forward to the flash version of the US PMI prints for April. The data will offer fresh insight into how the economy is performing. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the pair. Apart from this, the broader market risk sentiment will also be looked upon for some trading opportunities on the last day of the week.

Short-term technical outlook

From a technical perspective, the downside remains cushioned near the 38.2% Fibonacci level of the 102.59-110.97 strong move up. Bearish traders are likely to wait for sustained weakness below the mentioned support, around the 107.80 region, before positioning for any further depreciating move. The pair might then accelerate the fall towards the 107.00 mark before eventually dropping to test the 50% Fibo. level, around the 106.75 area.

On the flip side, the 108.00 mark now seems to act as immediate resistance ahead of the 108.25-30 supply zone. A sustained move beyond might prompt some short-covering move and push the pair further beyond an intermediate hurdle near the 108.55 region, towards challenging weekly tops, around the 108.80-85 region. This is closely followed by the 23.6% Fibo. level, around the 109.00 mark and 200-period SMA on the 4-hour chart, near the 108.15-20 region. Some follow-through buying will negate any near-term bearish bias and pave the way for a move towards reclaiming the key 110.00 psychological mark.