- USD/JPY gained some positive traction on Wednesday and recovered a part of the overnight losses.
- Dovish Fed expectations kept the USD bulls on the defensive and might cap any meaningful upside.
- COVID-19 woes might continue to benefit the safe-haven JPY, warranting caution for bullish traders.
The USD/JPY pair held on to its modest intraday gains through the early European session and was last seen trading near daily tops, around the 109.10-15 region.
Having shown some resilience below the 109.00 mark, the USD/JPY pair gained some positive traction on Wednesday and recovered a part of the overnight losses to the lowest level since May 26. The USD/JPY pair, for now, seems to have snapped two consecutive days of the losing streak, though any meaningful recovery remains elusive.
The US dollar remained on the defensive amid firming market expectations that the Fed will wait for a longer period before slowing its massive monetary support. Apart from this, concerns about the fast-spreading Delta variant of the coronavirus might continue to underpin the safe-haven Japanese yen and further cap gains for the USD/JPY pair.
Hence, it will be prudent to wait for some strong follow-through buying before confirming that the USD/JPY pair has bottomed out and positioning for any further appreciating move. Market participants now look forward to the US economic docket, featuring the releases of the ADP report and ISM Services PMI for some short-term trading impetus.
The key focus, however, will remain on the closely-watched US monthly jobs data. The popularly known NFP report is scheduled for release on Friday and will play a key role in influencing the near-term USD price dynamics. In the meantime, the broader market risk sentiment might produce some trading opportunities around the USD/JPY pair.
Technical levels to watch
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