USD/JPY retreats from session highs, returns to mid-110s on weaker USD

Despite the broad-based greenback weakness, the USD/JPY pair was able to continue to retrace Tuesday's sharp losses as the JPY struggled to find demand as a safe-haven in the risk-on environment. However, the disappointing macroeconomic data releases from the United States triggered another USD sell-off and forced the pair to erase a portion of its daily gains. As of writing, the pair was trading at 110.57, up 0.06% on the day.

The monthly report published by the ADP on Thursday revealed that the private sector employment increased 177K from May to June to fall short of the experts' estimate of 190K. Moreover, weekly initial jobless claims rose to 231K. The US Dollar Index eased below the 94 mark for the first time in 10 days and made a modest recovery ahead of the PMI data. At the moment, the index is down 0.18% on the day at 94.02.

Even if the PMI data come in above expectations, investors could choose to stay on the sidelines until the FOMC releases the minutes of its June 13 meeting. “We expect the minutes to provide additional insight into the Committee’s deliberations on longer-term monetary policy questions as well as the potential downside economic risks arising from US trade protectionism,” Nomura analysts note.

Meanwhile, major equity indexes in the United States opened higher on Thursday on improved market sentiment and could help the pair limit its losses. At the moment, the Dow Jones Industrial Average and the S&P 500 are up 0.7% and 0.6% respectively.

Technical levels to consider

The initial support for the pair aligns at 110.35 (20-DMA) ahead of 110 (psychological level/50-DMA) and 109.55 (200-DMA). On the upside, resistances are located at 110.70 (daily high), 111.15 (Jul. 3 high) and 112 (psychological level).