- USD/JPY gained some positive traction on Wednesday and snapped four days of the losing streak.
- A goodish pickup in the US bond yields eased the USD bearish pressure and extended some support.
- The risk-off mood might underpin the safe-haven JPY and cap the upside ahead of the FOMC minutes.
The USD/JPY pair edged higher during the early European session and refreshed daily tops, around the 109.10 region in the last hour.
Having defended a near one-month-old ascending channel support, the pair gained some positive traction on Wednesday and has now erased a major part of the overnight losses. The US dollar reversed an early dip to the lowest level since January amid a goodish pickup in the US Treasury bond yields. This, in turn, was seen as a key factor that assisted the USD/JPY pair to snap four consecutive days of the losing streak.
That said, expectations that the Fed will keep interest rates low for a longer period might continue to act as a headwind for the greenback. This, along with a sharp pullback in the equity markets, might extend some support to the safe-haven Japanese yen and cap the upside for the USD/JPY pair. Investors might also refrain from placing aggressive bets ahead of Wednesday's release of the FOMC policy meeting minutes.
Even from a technical perspective, bulls seemed struggling to capitalize on the intraday positive move beyond the 200-hour SMA. This further makes it prudent to wait for some follow-through buying before positioning for any meaningful appreciating move. The previous day's swing high, around the 109.25-30 region might act as an immediate hurdle, above which the USD/JPY pair could climb back to test monthly tops.
Heading into the key event risk, the US bond yields will continue to play a key role in influencing the USD price dynamics. Apart from this, traders might further take cues from the broader market risk sentiment. This might drive demand for the safe-haven JPY and produce some trading opportunities around the USD/JPY pair.