USD/JPY pares intraday losses to multi-week low amid modest USD recovery ahead of US PCE

The USD/JPY pair stalls its intraday decline near mid-132.00s and quickly recovers over 90 pips from a six-week low touched earlier this Friday. The pair is now trading around the 133.35-133.40 region, still down nearly 0.70% for the day.

As investors digest the less hawkish FOMC decision and Thursday's disappointing US GDP print, the US dollar reverses a major part of its early lost ground to the lowest level since July 5. A goodish pickup in the US Treasury bond yields is offering some support to the USD. Given the post-FOMC slump of nearly 500 pips from the vicinity of mid-137.00s, the said factors prompt some intraday short-covering around the USD/JPY pair on the last day of the week.

On the other hand, a further recovery in the global risk sentiment - as depicted by some follow-through positive moves in the equity markets - undermines the safe-haven Japanese yen. This is seen as another factor lending support to the USD/JPY pair. Apart from this, a big divergence in the monetary policy stance adopted by the Federal Reserve and the Bank of Japan suggests that the USD/JPY pair might have formed a temporary bottom near the 132.50 area.

That said, it would still be prudent to wait for strong follow-through buying before positioning for any meaningful positive move. Traders now look forward to the release of the US Personal Consumption Expenditures (PCE report) - the Fed preferred inflation gauge. This, along with the US bond yields, would influence the USD demand. Apart from this, the broader market risk sentiment could produce short-term trading opportunities around the USD/JPY Pair.

Technical levels to watch