USD/JPY is up by over 0.5% on the day now
The yen is the weakest performing major currency today as we see it retrace gains on the week, with USD/JPY looking poised to snap a four-day decline ahead of the weekend.
This comes amid the backdrop of a pullback in stocks after the sharp losses yesterday, with the risk-on vibes also helping Treasury yields keep a little higher today.
US 10-year yields are up by 4 bps to 0.71% and that is helping to provide a slight base for USD/JPY as we look towards North American trading later in the day:
Despite the bounce in USD/JPY from the lows close to 106.50, buyers still have more work to do as price action is still trading below key near-term levels:
There is some mild resistance from the swing region around 107.45 but the key level to watch will be the 100-hour MA (red line) @ 107.61.
Keep below that and the near-term bias stays more bearish but break above, and the bias then turns to being more neutral instead. Further resistance is then seen closer to 107.83 from the 38.2 retracement level of the drop this week.
The thing about yen pairs this week is that the four-day drop owes much to the retreat in yields as the breakout at the end of last week fades back into the April to May range.
Although yields are once again having some influence, it is unlikely to matter much should the market be contained within the levels seen over the past two months or so.
In turn, that may leave USD/JPY with little to go on once again if the only thing that matters is risk sentiment i.e. how the stock market is feeling (considering that both currencies trade very much similarly in that regard).
That could possibly bring back a familiar situation to the rangebound mode between 107.00 and 108.00 seen for the most part of May trading in the pair.
