USD/JPY holds steady near 110.00 mark, bullish lack conviction
- USD/JPY witnessed a subdued/range-bound trading action through the Asian session.
- The underlying bullish tone weighed on the safe-haven JPY and extended some support.
- A modest USD strength remained supportive, though softer US bond yields capped gains.
The USD/JPY pair lacked any firm directional bias and seesawed between tepid gains/minor losses through the early part of the trading action on Thursday.
The pair struggled to capitalize on the previous day's positive move or find acceptance above the key 110.00 psychological mark and witnessed a subdued/range-bound price action on Thursday. The underlying bullish tone continued undermining the safe-haven Japanese yen. This, along with a modest pickup in demand for the US dollar, acted as a tailwind for the USD/JPY pair.
The global risk sentiment remained supported by the fact that the US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine on Monday. Adding to this, comments from the top US infectious disease expert, Dr Anthony Fauci, saying that COVID-19 could be under control by early next year further boosted investors' confidence.
Meanwhile, the USD benefitted from expectations that the Fed might still begin rolling back its pandemic-era stimulus in 2021. This pushed the yield on the benchmark 10-year US government bond to 1.3474% on Wednesday. That said, a modest pullback in the US Treasury bond yields held the USD bulls from placing fresh bets and capped gains for the USD/JPY pair.
Investors also seemed reluctant, rather preferred to wait on the sidelines ahead of the Fed Chair Jerome Powell's speech at the Jackson Hole Symposium. Powell's remarks will be scrutinized for fresh clues about the likely timing of the Fed's tapering plan. This will influence the near-term USD price dynamics and provide a fresh directional impetus to the USD/JPY pair.
In the meantime, traders might take cues from Thursday's release of the Prelim US GDP print (second estimate) and Initial Weekly Jobless Claims later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, might produce some short-term trading opportunities around the USD/JPY pair.
Technical levels to watch