USD/JPY trades with modest losses, holds above 107.00 mark

The USD/JPY pair traded with a mild negative bias through the Asian session, albeit remained well with the previous day's broader trading range.

The pair extended the overnight pullback from over one-week lows and edged lower on the last trading day of the week, snapping two consecutive days of the winning streak. The downtick was sponsored by a subdued US dollar price action and the prevalent cautious mood, which extended some support to the safe-haven Japanese yen.

Investors remain concerned that a surge in new coronavirus cases could trigger fresh lockdown measures. This, in turn, seemed to have dampened prospects for a sharp V-shaped global economic recovery and continued weighing on investors' sentiment. However, a combination of supporting factors helped limit the downside for the USD/JPY pair.

The Japanese yen was undermined by the Bank of Japan (BoJ) Governor Haruhiko Kuroda's comments that the second wave of the coronavirus pandemic could hurt the Japanese economy “considerably”. Kuroda also signalled the central bank's readiness to ramp up stimulus measures to cushion any blow from the crisis, though saw no immediate need to cut rates.

Meanwhile, the USD remained supported by a modest pickup in the US Treasury bond yields, which further collaborated towards cushioning the downside for the USD/JPY pair, at least for the time being. This makes it prudent to wait for some follow-through selling before confirming that this week's bounce from multi-month lows might have already run out of the steam.

Moving ahead, market participants now look forward to the US economic data for some short-term trading impetus later during the early North American session. Friday's US economic docket features the release of Core PCE Price Index, Personal Income/Spending data and the final version of the June Michigan Consumer Sentiment Index.

Technical levels to watch