- A subdued USD price action prompted some selling around USD/JPY on Thursday.
- A generally positive risk tone, uptick in the US bond yields should help limit losses.
The USD/JPY pair remained depressed heading into the European session and was last seen flirting with daily lows, just above the key 110.00 psychological mark.
The pair witnessed some selling on Thursday and for now, seems to have snapped two consecutive days of the winning streak, stalling this week's solid rebound from the vicinity of the 109.00 mark. The downtick lacked any obvious fundamental catalyst and could be solely attributed to some profit-taking amid a subdued US dollar price action. That said, a combination of factors should help limit any deeper losses, rather assist the USD/JPY pair to attract dip-buying at lower levels.
Investors now seemed to set aside worries about the economic fallout from the spread of the highly contagious Delta variant of the coronavirus. This was evident from a further recovery in the global risk sentiment and a generally positive tone around the equity markets, which tends to undermine demand for the safe-haven Japanese yen. This, along with a follow-through uptick in the US Treasury bond yields, should act as a tailwind for the USD and lend some support to the USD/JPY pair.
Hence, it will be prudent to wait for some strong follow-through selling before positioning for the resumption of the recent pullback from the 111.65 area, or YTD tops touched earlier this month. Market participants now look forward to the US economic docket, featuring the releases of the usual Initial Weekly Jobless Claims and Existing Home Sales. This, along with the broader market risk sentiment, the US bond yields and the USD price dynamics might provide some impetus to the USD/JPY pair.
