USD/JPY on the defensive, holds above 107.00 mark
- Concerns over worsening US-China relations, rising COVID-19 cases benefitted the safe-haven JPY.
- Sliding US bond yields undermined the USD and prompted some selling around the USD/JPY pair.
- A mildly positive tone around the equity markets might help limit deeper losses, at least for now.
The USD/JPY pair edged lower through the early European session and refreshed daily lows in the last hour, with bears awaiting a sustained break below the 107.00 mark.
The pair struggled to capitalize on the previous day's positive move, instead met with some fresh supply on the last trading day of the week amid some renewed US dollar selling bias. A sharp intraday turnaround in the US Treasury bond yields undermined the greenback and exerted some downward pressure on the USD/JPY pair.
This comes amid worries that the second wave of the coronavirus infections might curb economic activity. This coupled with concerns about worsening US-China relations drew some haven flows towards the Japanese yen and further contributed to the USD/JPY pair might weaker tone through the first half of the trading action.
However, a mildly positive tone surrounding the equity markets might hold investors from placing any fresh bearish bets and help limit deeper losses. Even from a technical perspective, the USD/JPY pair has been oscillating in a familiar trading range over the past two weeks or so, further warranting some caution for aggressive traders.
Market participants now look forward to the US economic docket, featuring the release of housing market data and Prelim Michigan Consumer Sentiment Index. The data might influence the USD price dynamics, which along with the market risk sentiment might produce some trading opportunities on the last day of the week.
Technical levels to watch