USD/JPY sticks to modest intraday gains around 110.00 mark

The USD/JPY pair held on to its intraday gains through the early European session, with bulls awaiting a sustained move beyond the key 110.00 psychological mark.

The pair managed to regain some positive traction on the last trading day of the week and for now, seems to have snapped two consecutive days of the losing streak. The Japanese yen weakened a bit after the Bank of Japan lowered its growth forecast for the current fiscal year ending in March 2020 to 3.8% from 4.0% projected in April. This, in turn, was seen as a key factor that extended some support to the USD/JPY pair.

That said, the BoJ upgraded its forecast for the next fiscal year and expects the economy to expand 2.7% against 2.4% previous on expectations that consumption will pick up as vaccinations accelerate. Earlier the Japanese central bank decided to keep its benchmark policy rate steady at -10 basis points at the July monetary policy meeting and also maintained its pledge to buy J-REITS at an annual pace of up to JPY180 billion.

Bullish traders further took cues from a goodish pickup in the US Treasury bond yields, which underpinned the US dollar. Adding to this, expectations that the Fed will tighten its policy sooner than anticipated amid rising inflationary pressures further acted as a tailwind for the greenback. That said, COVID-19 jitters continued lending some support to the safe-haven JPY and capped gains for the USD/JPY pair.

Market participants now look forward to the US economic docket, highlighting the release of monthly Retail Sales figures later during the early North American session. This, along with the US bond yields, will influence the USD and provide some impetus to the USD/JPY pair. Apart from this, developments surrounding the coronavirus saga and the broader market risk sentiment might produce some trading opportunities.

Technical levels to watch