USD/JPY finds a mild bounce from 126.70, weakness looks likely on vulnerable DXY
The USD/JPY has witnessed an unreliable rebound after hitting an intraday low of 126.67 in the Asian session. The asset has been trading in a defined range since Tuesday and is expected to continue its volatility contraction amid the unavailability of any significant economic event in today’s session.
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The USD/JPY pair attracted some dip-buying in the vicinity of mid-126.00s on Thursday and recovered a part of its early lost ground. The intraday uptick pushed spot prices back above the 127.00 mark during the early North American session, though lacked any follow-through.
The risk-on impulse - as depicted by a generally positive tone around the equity markets - undermined the safe-haven Japanese yen and was seen as a key factor that extended some support to the USD/JPY pair. That said, concerns about softening global economic growth kept a lid on the optimistic move, which, along with subdued US dollar demand acted as a headwind for the major.
Speculations that the Fed could pause the rate hike cycle later this year dragged the yield on the benchmark 10-year US government bond to a fresh six-week low. This, in turn, failed to assist the USD to capitalize on the overnight bounce from the monthly low. Even the mixed US macro data also did little to impress the USD bulls or provide any impetus to the USD/JPY pair.
The Prelim US GDP report showed that the world's largest economy contracted by a 1.5% annualized pace during the first quarter of 2022 as against the advance estimate for a 1.4% decline. The slight disappointment from the backwards-looking data, to some extent, was offset by better-than-expected US Weekly Initial Jobless Claims, which fell to 210K last week from the 218K previous.
Thursday's US economic docket also features the release of Pending Home Sales, though is unlikely to influence the buck or produce any meaningful trading opportunities around the USD/JPY pair. Meanwhile, spot prices, so far, have managed to hold above the monthly low. This, in turn, makes it prudent to wait for some follow-through selling before positioning for any further losses.
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USD/JPY: A reversal of fortune? Premium
USD/JPY sheds four weeks of gains, stalls for three days near 127.00. BoJ Governor Kuroda hints at tighter monetary policy. US core PCE inflation cools to 4.9% from 5.2% in April. FXStreet Forecat Poll predicts a pause and recovery at 126.00.