• The global flight to safety boosted the JPY and prompted some selling around USD/JPY.
  • Retreating US bond yields turned out to be another factor that exerted downward pressure.
  • The emergence of USD buying helped limit losses amid the Fed-BoJ policy divergence.

The USD/JPY pair maintained its offered tone through the early North American session, albeit has managed to rebound a few pips from the daily low. The pair was last seen trading around the 127.40-127.35 region, still down over 0.40% for the day.

The worsening global economic outlook continued weighing on investors' sentiment and triggered a fresh wave of the risk-aversion trade. This, in turn, boosted demand for traditional safe-haven currencies, including the Japanese yen, and exerted downward pressure on the USD/JPY pair. The anti-risk flow was reinforced by a fresh leg down in the US Treasury bond yields, which further inspired bearish traders and dragged spot prices back closer to the monthly low.

The downside, however, remains cushioned, at least for the time being, amid the emergence of some US dollar buying at lower levels. Apart from this, a big divergence in the monetary policy stance adopted by the Bank of Japan (dovish) and the Fed (hawkish) assisted the USD/JPY pair to find some support ahead of the 127.00 round-figure mark. This, in turn, makes it prudent to wait for strong follow-through selling before positioning for any further depreciating move.

Market participants now look forward to the US economic docket - featuring the releases of the flash PMI prints for May, New Home Sales and Richmond Manufacturing Index. This, along with Fed Chair Jerome Powell's speech and the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities.

Technical levels to watch

USD/JPY

Overview
Today last price 127.38
Today Daily Change -0.53
Today Daily Change % -0.41
Today daily open 127.91
 
Trends
Daily SMA20 129.26
Daily SMA50 125.89
Daily SMA100 120.54
Daily SMA200 116.54
 
Levels
Previous Daily High 128.07
Previous Daily Low 127.16
Previous Weekly High 129.78
Previous Weekly Low 127.02
Previous Monthly High 131.26
Previous Monthly Low 121.67
Daily Fibonacci 38.2% 127.72
Daily Fibonacci 61.8% 127.51
Daily Pivot Point S1 127.36
Daily Pivot Point S2 126.8
Daily Pivot Point S3 126.44
Daily Pivot Point R1 128.27
Daily Pivot Point R2 128.63
Daily Pivot Point R3 129.18

 

 

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