USD/JPY recovers further from one-week lows, climbs to 110.70-75 area
- USD/JPY staged a modest bounce from one-week tops touched earlier this Wednesday.
- The uptick lacked any obvious fundamental catalyst and is more likely to remain capped.
- The risk-off mood might benefit the safe-haven JPY and cap amid sliding US bond yields.
- The USD bulls remained on the defensive ahead of the highly-anticipated FOMC minutes.
The USD/JPY pair managed to rebound around 30-35 pips from over two-week lows touched during the Asian session and was last seen trading with modest gains, near the 110.70-75 region.
The pair attracted some buying near the 110.40 region on Wednesday and for now, seems to have stalled its recent pullback from YTD tops, around the 111.65 area touched last week. The USD/JPY pair has now moved into the positive territory for the first day in the previous four, though a combination of factors might keep a lid on any further gains.
Concerns about the spread of the highly contagious Delta variant of the coronavirus continued weighing on investors' sentiment. This was evident from the prevalent cautious mood in the equity markets, which could underpin the safe-haven Japanese yen. This, along with a subdued US dollar demand, might further collaborate to cap the upside for the USD/JPY pair.
The USD bulls struggled to capitalize on the previous day's goodish move up amid expectations that the Fed will wait longer before tapering its asset purchases or raising interest rates. Hence, the market focus will remain glued to the release of the FOMC June meeting minutes, which will be looked upon for clues about the US central bank's monetary policy outlook.
Apart from this, a weaker tone surrounding the US Treasury bond yields was seen as another factor that acted as a headwind for the greenback. This makes it prudent to wait for some strong follow-through buying before confirming that the USD/JPY pair might have bottomed out in the near term and positioning for any further appreciating move.
Technical levels to watch