USD/JPY struggles for direction, stuck in a range above mid-109.00s
- A combination of diverging forces failed to provide any impetus to USD/JPY on Friday.
- COVID-19 jitters, the risk-off mood benefitted the safe-haven JPY and capped gains.
- Expectations that the Fed will begin tapering soon acted as a tailwind for the USD.
The USD/JPY pair lacked any firm directional bias and seesawed between tepid gains/minor losses heading into the European session. The pair was last seen hovering around the 109.70-65 region, nearly unchanged for the day.
Following the previous day's dramatic turnaround from the 110.20-25 region, or weekly tops, the USD/JPY pair witnessed a subdued/range-bound price action on the last day of the week. The prevalent risk-off environment – amid persistent COVID-19 jitters – continued underpinning the safe-haven Japanese yen and capped the upside for the major.
The global flight to safety was reinforced by a modest downtick in the US Treasury bond yields, which kept the US dollar bulls on the defensive. This was seen as another factor that acted as a headwind for the USD/JPY pair. That said, the prospects for the Fed rolling back its pandemic-era stimulus extended some support to the greenback.
The minutes of the last FOMC meeting held on July 27-28 seems to have convinced investors that the Fed is now comfortable to begin tapering its massive asset purchase program later this year. Policymakers thought that the benchmark of substantial further progress criterion has been met in terms of inflation and maximum employment.
The combination of diverging forces held traders from placing aggressive bets amid absent relevant market-moving economic release on Friday. Moving ahead, the focus now shifts to the Jackson Hole Symposium scheduled for 26 to 28 August. In the meantime, the broader market risk sentiment and the USD price dynamics might provide some impetus to the USD/JPY pair.
Technical levels to watch