USD/JPY bounces off weekly lows, holds steady near 105.70 area

The USD/JPY pair managed to rebound around 20 pips from weekly lows and was last seen hovering near the top end of its daily trading range, around the 105.70 region.

The pair extended this week's retracement slide from the 106.45 region and remained depressed through the first half of the trading action amid the heavily offered tone surrounding the US dollar. Despite Monday's better-than-expected US ISM Manufacturing PMI, investors remain sceptic about the US economic recovery. This, in turn, was seen as one of the key factors that continued weighing on the greenback.

Apart from this, the impasse over the next round of the US fiscal stimulus further undermined the already weaker USD. It is worth reporting that the US lawmakers were still far apart and have been struggling to agree on the coronavirus relief package. White House negotiators on Tuesday vowed to work "around the clock" with congressional Democrats to reach a deal by the end of this week.

However, the US Treasury Secretary Steven Mnuchin warned that "we're not going anywhere close" to the $3.4 trillion that Democrats have been seeking. This coupled with the recent fall in the US Treasury bond yields exerted some additional pressure on the USD/JPY pair. However, the upbeat mood around the equity markets dented the Japanese yen's safe-haven status and helped limit deeper losses.

Market participants now look forward to important US macro data for some impetus later during the early North American session. Wednesday's US economic docket highlights the release of the ADP report on private-sector employment and ISM Non-Manufacturing PMI for the month of July.

Technical levels to watch