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USD/JPY pares intraday losses to multi-week low


29 July 2022

USD/JPY stages a goodish bounce from a multi-week low touched earlier this Friday. Recovering US bond yields help revive the USD demand and offers support to the pair. Investors now look forward to the US PCE report for some meaningful trading impetus. The USD/JPY pair stalls its intraday decline near mid-132.00s and quickly recovers over 90 pips from a six-week low touched earlier this Friday. The pair is now trading around the 133.35-133.40 region, still down nearly 0.70% for the day.

As investors digest the less hawkish FOMC decision and Thursday's disappointing US GDP print, the US dollar reverses a major part of its early lost ground to the lowest level since July 5. A goodish pickup in the US Treasury bond yields is offering some support to the USD. Given the post-FOMC slump of nearly 500 pips from the vicinity of mid-137.00s, the said factors prompt some intraday short-covering around the USD/JPY pair on the last day of the week.

On the other hand, a further recovery in the global risk sentiment - as depicted by some follow-through positive moves in the equity markets - undermines the safe-haven Japanese yen. This is seen as another factor lending support to the USD/JPY pair. Apart from this, a big divergence in the monetary policy stance adopted by the Federal Reserve and the Bank of Japan suggests that the USD/JPY pair might have formed a temporary bottom near the 132.50 area.

That said, it would still be prudent to wait for strong follow-through buying before positioning for any meaningful positive move. Traders now look forward to the release of the US Personal Consumption Expenditures (PCE report) - the Fed preferred inflation gauge. This, along with the US bond yields, would influence the USD demand. Apart from this, the broader market risk sentiment could produce short-term trading opportunities around the USD/JPY Pair.

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