USD/JPY clings to modest recovery gains, comfortably above 107.00 mark
- USD/JPY stages a goodish intraday recovery amid a recovery in the US equity futures.
- A subdued USD price action failed to impress bulls or provide any additional boost.
- Fears of a second wave of virus infections might further collaborate towards capping.
The USD/JPY pair held on to its goodish intraday recovery gains and was last seen trading just a few pips below daily tops, around the 107.20 region.
The pair quickly reversed an early dip back closer to one-month lows and managed to attract some buying interest near the 106.60 region. The uptick on the last trading day of the week was sponsored by a solid rebound in the US equity futures, which undermined demand for the safe-haven Japanese yen.
Bulls further took cues from a strong pickup in the US Treasury bond yields, which further collaborated to the pair's rally of over 70 pips from daily swing lows. However, subdued US dollar price action failed to impress bullish traders or provide any additional boost to the USD/JPY pair.
This comes on the back fading hopes for a sharp V-shaped economic recovery and kept a lid on any strong gains for the USD/JPY pair. It is worth recalling that the Fed on Wednesday offered a bleak outlook and supported the idea that economic recovery will take longer than initially estimated.
This coupled with fears of a second wave of coronavirus outbreak and the possibility of renewed lockdowns to curb the spread further held investors from placing any aggressive bullish bets. This, in turn, might further contribute towards capping any meaningful upside for the USD/JPY pair.
Hence, it will be prudent to wait for some strong follow-through buying before confirming that this week's sharp bearish slide might have already run its course. Any subsequent move is likely to confront resistance near the 107.50 horizontal level, which if cleared will set the stage for a further near-term appreciating move.
Moving ahead, market participants now look forward to the release of the preliminary June Michigan Consumer Sentiment Index from the US. This along with the broader market risk sentiment might provide some impetus and produce some short-term trading opportunities on the last day of the week.
Technical levels to watch