- USD/JPY witnessed a dramatic turnaround from weekly tops set earlier this Thursday.
- The risk-off impulse boosted the safe-haven JPY and prompted some aggressive selling.
- Bulls seemed unaffected by the ongoing strong USD positive move to fresh YTD tops.
The USD/JPY pair retreated over 70 pips from weekly tops and dived to fresh daily lows, around mid-109.00s during the early part of the European trading action.
The pair struggled to capitalize on its intraday positive move and witnessed a dramatic turnaround from the 110.20-25 region amid a strong pickup in demand for the safe-haven Japanese yen. As countries take measures to combat the spread of the Delta variant of the coronavirus, signs that the global economic recovery is stalling weighed on investors' sentiment.
This, along with expectations that the Fed will start tapering its bond purchases later this year, further took its toll on the global risk sentiment. This was evident from a sea of red across the global equity markets, which, in turn, forced investors to take refuge in traditional safe-haven assets and provided a strong lift to the JPY.
Meanwhile, the risk-off impulse and the global flight to safety triggered a fresh leg down in the US Treasury bond yields. This was seen as another factor that contributed to the USD/JPY pair's sharp decline. Bulls seemed rather unaffected by an extension of this week's US dollar bullish momentum to fresh YTD tops, or the highest level since November 2020.
Nevertheless, the USD/JPY pair, for now, seems to have stalled this week's goodish rebound from the vicinity of the 109.00 mark and snapped two consecutive days of the winning streak. Market participants now look forward to the US macro data – the Philly Fed Manufacturing Index and Initial Weekly Jobless Claims – for a fresh impetus.