- USD/JPY attracted some dip-buying near the 105.40 area, just ahead of weekly lows.
- A modest USD bounce, the prevalent risk-on mood remained supportive of the uptick.
- The attempted recovery lacked any strong bullish conviction, warranting some caution.
The USD/JPY pair edged higher during the early European session and refreshed daily tops, around the 105.70 region in the last hour.
The pair once again showed some resilience below 200-hour SMA and managed to attract some dip-buying ahead of weekly lows, around the 105.30 region set in the previous session. The uptick was sponsored by a modest US dollar rebound and the upbeat market mood, which tends to undermine demand for the safe-haven Japanese yen.
Having dropped to fresh two-year lows, the USD witnessed some intraday short-covering move amid extremely oversold conditions and extended some support to the major. This comes amid the prevalent bullish sentiment around the equity markets, which further collaborated to the USD/JPY pair's intraday bounce of around 30-35 pips.
However, concerns about the pace of the US economic recovery might keep a lid on the attempted USD recovery move. The market worries were further fueled by Wednesday's disappointing ADP report, which showed that the private-sector employment in the US increased by only 167K and indicated that the labour market recovery was faltering.
Adding to this, the impasse over the next round of the US fiscal stimulus measures might hold the USD bulls from placing any aggressive bets. It is worth reporting that Republicans and Democrats harden their stances on the new coronavirus relief plan, raising uncertainty over the possibility of an agreement before the end-of-week deadline.
Thursday's US economic docket highlights the release of Initial Weekly Jobless Claims, scheduled later during the early North American session. The data might produce some short-term trading opportunities, though is unlikely to be a major game-changer ahead of the closely watched official monthly jobs report, popularly known as NFP on Friday.
This makes it prudent to wait for some strong follow-through buying before traders start positioning for any further appreciating move for the USD/JPY pair. The overnight swing high, around the 105.85 region, is likely to act as an immediate resistance, above which the pair is likely to aim back towards testing weekly swing highs, around the 106.45 zone.
Technical levels to watch
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