- USD/JPY failed to capitalize on the overnight recovery move from five-month lows.
- A combination of factors should help limit losses amid the prevailing risk-on mood.
The USD/JPY pair edged lower through the Asian session on Thursday and is currently placed near the lower end of its daily trading range, around the 107.30-25 region.
The pair failed to capitalize on the previous day’s recovery move from five-month lows and met with some fresh supply near the 107.75 region on Thursday amid a subdued US dollar price action.
The downside seems limited
As investors looked past Wednesday’s upbeat US macro data, the greenback consolidated the overnight gains and failed to impress bullish traders or provide any meaningful impetus to the major.
Meanwhile, concerns about the impact of the coronavirus outbreak on the global economy extended some support to the Japanese yen’s safe-haven status and contributed to the pair’s downtick.
The negative outlook, to some extent, were offset by the recent stimulus offered by major central banks. This coupled with the ongoing rally in equity markets might help limit any deeper losses.
The risk-on flow was evident from a strong pickup in the US Treasury bond yields, which should assist the USD to regain some positive traction and hold investors from placing fresh bearish positions.
Thursday’s US economic docket lacks any major market-moving releases. Hence, the USD price dynamics and the broader market risk sentiment should play a key role in influencing the pair’s momentum.
Technical levels to watch