USD/JPY clings to gains near mid-105.00s, over 1-week tops post-US macro data

The USD/JPY pair held on to its modest gains through the early North American session, with bulls now looking to build on the momentum beyond the 105.50-55 supply zone, or over one-week tops.

The pair attracted some dip-buying near the 105.25-20 region and turned positive for the fifth consecutive session on the last trading day of the week amid resurgent US dollar demand. Worries about the return of severe lockdown restrictions to contain the second wave of coronavirus infections, along with signs of economic slowdown continued boosting the greenback's status as the global reserve currency.

The market concerns were further fueled by Friday's release of US Durable Goods Orders, which recorded a modest growth of 0.4% in August. The reading marked a sharp deceleration from the previous month's upwardly revised reading of 11.7% and fell short of market expectations. Meanwhile, the USD seemed largely unaffected by the disappointing reading and also shrugged off a weaker tone surrounding the US Treasury bond yields.

Meanwhile, the latest optimism over additional US fiscal stimulus measures to shore up the domestic economy turned out to be short-lived, which was evident from a fresh leg down in the equity markets. It is worth recalling that a key lawmaker said on Thursday that Democrats in the US House of Representatives were working on a $2.2 trillion package that could be voted on next week.

The risk-off mood, which tends to underpin the Japanese yen's safe-haven demand, however, did little to influence or provide any meaningful impetus to the USD/JPY pair. Some follow-through buying from current levels will be seen as a fresh trigger for bullish traders and set the stage for an extension of this week's strong rebound from the 104.00 mark, or over six-month lows touched on Monday.

Technical levels to watch