USD/JPY pares modest intraday gains, back below 110.00 mark
- USD/JPY struggled to capitalize on its modest intraday gains amid subdued USD demand.
- Dovish Fed expectations weighed on the USD and capped gains amid sliding US bond yields.
- The prevalent risk-on mood undermined the safe-haven JPY and helped limit the downside.
The USD/JPY pair struggled to capitalize on its intraday uptick and remained confined in a range, around the key 110.00 psychological mark through the first half of the European session.
The pair stalled the previous day's sharp retracement slide from the 110.40 region, or near three-week tops and find some support near 200-hour SMA on Thursday. However, a combination of diverging forces failed to provide any meaningful impetus and led to a subdued/range-bound price action.
The underlying bullish sentiment in the financial markets continued undermining demand for the safe-haven Japanese yen and acted as a tailwind for the USD/JPY pair. On the other hand, the US dollar languished near one-month lows and did little to impress bulls or provide any boost to the pair.
Investors now seem convinced that the Fed would wait longer before reducing the pace of its massive pandemic-era bond purchases. The market speculations were reaffirmed by Wednesday's ADP report, which showed that the US private-sector employers hired far fewer workers than expected in August.
The data raised doubts about the US labour market recovery and further dampened prospects for an early Fed lift-off. This was evident from some follow-through downtick in the US Treasury bond yields, which weighed on the USD and further collaborated to cap the USD/JPY pair's modest intraday uptick.
Market participants now look forward to the release of Initial Weekly Jobless Claims data from the US. Apart from this, a scheduled speech by Atlanta Fed President Raphael Bostic, along with the broader market risk sentiment might produce some trading opportunities around the USD/JPY pair.
The key focus, however, remains on Friday's US monthly jobs data. The closely-watched NFP report will influence market expectations about the Fed's next policy move, which will influence the near-term USD price dynamics and help determine the next leg of a directional move for the USD/JPY pair.
Technical levels to watch