USD/JPY refreshes session lows, around 106.20 region amid softer risk tone

• USD/JPY edged lower on Wednesday and eroded a part of the previous day’s strong gains.
• A softer risk tone benefitted the safe-haven JPY and exerted some pressure on the major.
• Surging US bond yields, a modest pickup in the USD demand helped limit deeper losses.

The USD/JPY pair extended its steady intraday downtick through the early European session and refreshed daily lows, around the 106.25-20 region in the last hour.

The pair failed to capitalize on the previous day's strong positive move to over one-week tops and met with some fresh supply on Wednesday. A modest pullback in the equity markets provided a modest lift to the Japanese yen's safe-haven status and was seen as one of the key factors exerting some pressure on the USD/JPY pair.

Tuesday's disappointing US consumer confidence index fueled worries about the US economic recovery and took its toll on the global risk sentiment. However, the optimism over a potential treatment/vaccine for the highly contagious disease, along with easing concerns about the US-China standoff might help limit any deeper losses.

This coupled with a modest pickup in the US dollar demand and the ongoing upsurge in the US Treasury bond yields should extend some support to the USD/JPY pair. Moreover, investors might also be reluctant to place any aggressive bets ahead of the Fed Chair Jerome Powell's speech at the Jackson Hole Symposium on Thursday.

This makes it prudent to wait for some strong follow-through selling before positioning for any further near-term depreciating move. In the meantime, Wednesday's release of the US Durable Goods Orders data will be looked upon for some short-term trading opportunities later during the early North American session.

Technical levels to watch