USD/JPY bounces off one-week lows, flat-lined above mid-110.00s
- A combination of factors assisted USD/JPY to reverse an early dip to one-week lows.
- A modest uptick in the US bond yields underpinned the USD and remained supportive.
- The prevalent cautious mood benefitted the safe-haven JPY and capped the upside.
The USD/JPY pair reversed an Asian session dip to one-week lows and was last seen trading in the neutral territory, around the 110.60-65 region.
Having faced rejection near the 111.00 mark on Monday, the pair witnessed some selling during the early part of the trading action on Tuesday and moved further away from YTD tops touched last week. However, a combination of factors helped limit any further losses, rather assisted the USD/JPY pair to attract some dip-buying near the 110.40 region.
The US dollar remained supported by growing speculations that the Fed will tighten its monetary policy earlier if price pressures continue to intensify. The USD bulls further took cues from a modest uptick in the US Treasury bond yields, which was seen as another factor that contributed to the USD/JPY pair's intraday bounce of around 20-25 pips.
That said, the prevalent cautious mood around the equity markets acted as a tailwind for the safe-haven Japanese yen and kept a lid on any further gains for the USD/JPY pair. Investors also seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of Friday's release of the closely watched US jobs data.
The popularly know NFP report would influence market expectations about the timing for a move by the Fed to tighten its monetary policy. This, in turn, will play a key role in driving the greenback in the near term and help determine the next leg of a directional move for the USD/JPY pair.
In the meantime, traders on Tuesday might take cues from the release of the Conference Board's US Consumer Confidence Index, due later during the early North American session. Apart from this, the US bond yields and the broader market risk sentiment will further contribute to produce some short-term trading opportunities around the USD/JPY pair.
Technical levels to watch