- USD/JPY struggled to capitalize on the early uptick amid sustained USD selling bias.
- The upbeat mood undermined the safe-haven JPY and helped limit deeper losses.
- Investors now look forward to the US macro releases for some meaningful impetus.
The USD/JPY pair lacked any firm directional bias and seesawed between tepid gains/minor losses through the Asian session on Wednesday.
A combination of diverging forces failed to assist the USD/JPY pair to capitalize on its early uptick to near two-month tops and led to the sideways consolidative price action on Wednesday. Sustained US dollar selling remains the dominant theme and was seen as one of the key factors capping the upside for the major.
The pair witnessed a modest intraday pullback of around 40-45 pips from near two-month tops, albeit the prevalent upbeat market mood helped limit any deeper losses. Growing optimism about the global economic recovery and the prevalent risk-on environment underpinned demand for the perceived safe-haven Japanese yen.
Given the overnight strong rally of over 125 pips, investors now seemed to wait for a fresh catalyst before placing any fresh directional bets. It is worth reporting that the USD/JPY pair on Tuesday caught some aggressive bids and broke through a two-week-old trading range, taking along some trading stops near the 108.00-108.10 region.
It will now be interesting to see if bulls are able to maintain their dominant position or remain on the side-lines as the focus now shifts to the US macro data. Wednesday's US economic docket highlights the release of the ADP report on private-sector employment, which will be followed by the ISM Non-Manufacturing PMI for May.
The data might influence the USD price dynamics. This along with the broader market risk sentiment will play a key role in producing some meaningful trading opportunities later during the early North American session. The key focus, however, will be on Friday's closely watched US monthly jobs report, popularly known as NFP.
Technical levels to watch