USD/JPY consolidates in a range, below mid-104.00s

The USD/JPY pair edged higher during the Asian session, albeit lacked any strong follow-through and has now retreated around 15 pips from daily tops near mid-104.00s.

The pair managed to regain some positive traction on Thursday and built on the previous day's modest rebound from the 104.10 region, or six-week lows touched in the wake of the global flight to safety. A solid rebound in the US equity futures undermined the safe-haven Japanese yen and was seen as a key factor behind the USD/JPY pair's modest uptick.

The JPY was further pressured by the Bank of Japan's (BoJ) downward revision of growth and inflation forecasts for fiscal 2020/21. After the conclusion of the October monetary policy meeting, the BoJ decided to leave benchmark interest rates unchanged at -0.1% and maintain the 10-year Japanese government bond yield target at around 0%.

However, the uncertain US political situation held the US dollar bulls from placing any aggressive bets and kept a lid on any further gains for the USD/JPY pair. The incoming polls have been indicating that Democrat rival Joe Biden has a lead over Republican incumbent President Donald Trump, though the gap is narrow in certain key swing states.

Nevertheless, the USD/JPY pair was last seen hovering near the 104.35 region and any meaningful recovery still seems elusive amid growing worries over the ever-increasing new coronavirus cases. Investors remain worried that renewed lockdown measures to curb the second wave of COVID-19 infections could derail the tepid global economic recovery.

Moving ahead, market participants now look forward to the release of the Advance US Q3 GDP report for a fresh impetus. The US economy is expected to have rebounded swiftly and grew by 31% annualized pace during the July-September quarter as compared to the 31.4% contraction recorded in the previous quarter. This, along with the release of the usual Initial Weekly Jobless Claims and the ECB policy decision, will influence the USD price dynamics and produce some meaningful trading opportunities later during the early North American session.

Technical levels to watch