USD/JPY struggles for a firm direction, flat-lined around 104.60 area
- USD/JPY struggled to capitalize on the overnight goodish rebound from multi-month lows.
- The risk-off mood benefitted the safe-have JPY and exerted some support to the major.
- The USD was seen consolidating near six-week tops and helped limit any meaningful slide.
The USD/JPY pair seesawed between tepid gains/minor losses through the Asian session on Tuesday and was last seen trading in the neutral territory, around the 104.60-65 region.
The pair failed to capitalize on the previous day's solid intraday bounce from the 104.00 mark – the lowest level since March 11 – and met with some fresh supply on Tuesday. The prevalent risk-off mood benefitted the safe-haven Japanese yen and exerted some pressure on the USD/JPY pair.
The ever-increasing number of COVID-19 cases dampened prospects of a sharp V-shaped global economic recovery and dented investors appetite for perceived riskier assets. The anti-risk flow was evident from a weaker tone across the global equity markets and the US Treasury bond yields.
Meanwhile, rising odds of fresh lockdown measures to curb the second wave of coronavirus outbreak boosted the US dollar's status as the global reserve currency. A stronger greenback was seen as one of the key factors that extended some support to the USD/JPY pair and helped limit deeper losses.
The USD bulls, however, seemed reluctant amid expectations that the Fed Chair Jerome Powell will reiterate to keep rates lower for longer during his congressional testimony later this Tuesday. This makes it prudent to wait for some follow-through buying before positioning for any further gains.
In the meantime, developments surrounding the coronavirus saga will continue to play a key role in influence the broader market risk sentiment. This coupled with second-tier US economic releases – Existing Home Sales and Richmond Manufacturing Index – will be looked upon for some trading impetus.
Technical levels to watch