USD/JPY flat-lined below 110.00 mark as NFP looms large

The USD/JPY pair surrendered its modest intraday gains and was last seen trading in the neutral territory, just below the 110.00 mark heading into the North American session.

The pair reversed a dip to multi-day lows touched earlier this Friday and rallied around 25-30 pips from the 109.80 region on reports that Japan’s Prime Minister Yoshihide Suga is likely to resign. The Japanese media outlets further reported that PM Suga will not run in the leadership vote for his party this month and will step down on September 30.

The latest development, along with the underlying bullish sentiment in the financial markets undermined the safe-haven Japanese yen. This, in turn, was seen as a key factor that provided a modest lift to the USD/JPY pair. That said, sustained US dollar selling bias kept a lid on any meaningful upside for the major, at least for now.

The USD languished near one-month lows as investors pushed back their expectations about the likely timing for an imminent taper announcement by the Fed. Apart from this, fading hopes for an early Fed lift-off continued acting as a tailwind for the greenback and failed to assist the USD/JPY pair to capitalize on its monetary intraday uptick.

Investors also seemed reluctant to place any aggressive bets, rather prefer to wait for a fresh catalyst from Friday's release of the US monthly jobs data. Given that the Fed has made labour market recovery a condition for policy tightening, the NFP report might provide clues on when the US central bank will roll back its pandemic-era stimulus.

This, in turn, will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the USD/JPY pair. Even from a technical perspective, the pair has been oscillating in a familiar trading range over the past two weeks or so, further making it prudent to wait for a sustained break in either direction.

Technical levels to watch