USD/JPY fades a spike to 106.80, focus on Treasury yields, US data

Heading into Europe, the USD/JPY pair witnessed a sudden bout of aggressive buying and jumped to 106.78 highs, reversing Wednesday’s slide. However, the sellers returned at higher levels, knocking-off the rates back towards the 106.25 region, where it now wavers.

Mixed market sentiment to keep the gains limited

The volatile move in the spot seen over the last hour can be largely attributed to the holiday-thinned trades in Europe, with the Italian, Spanish and French markets closed in observance of Assumption Day.

Moreover, the extension of the relief rally in US equity futures and a bounce seen in the Treasury yields across the curve further helped the spot extend the break above the 106 handle. Meanwhile, the US dollar index trades near 98 handle, consolidating the recent rally to weekly tops of 98.05.

Despite the renewed strength, the growing recession fears, as signaled by the US 2-year-10-year Treasury yield curve inversion will continue to keep the bulls on the edge. Therefore, any upside in the pair is likely to be short-lived, as the demand for the safe-haven Yen is likely to remain underpinned amid market panic and unrest.

The US Retail Sales data among other minority reports will also have a significant impact on the major while the risk sentiment will continue to remain the main market driver in the day ahead.

USD/JPY Technical levels