• USD/JPY maintained its bid tone through the mid-European session on Thursday.
  • An uptick in the US bond yields and a modest USD strength remained supportive.
  • A softer risk tone benefitted the safe-haven JPY and kept a lid on any further gains.

The USD/JPY pair reversed a mid-European session dip to the 109.60 area and has now moved back closer to the top end of its daily trading range. The pair was last seen hovering around the 109.80 region, up 0.25% for the day.

A sharp pullback in the US equity futures drove some haven flows towards the Japanese yen and exerted some pressure on the USD/JPY pair during the second half of the trading action on Thursday. That said, a combination of factors continued acting as a tailwind and helped limit any deeper losses, at least for the time being.

Investors remained concerned that an extension of the state of emergency in Tokyo and eight other prefectures by about 3 weeks to June 20 could hinder Japan’s fragile economic recovery. This continued weighing on the JPY, which, along with a modest US dollar strength assisted the USD/JPY pair to stick to its intraday gains.

Investors have started getting nervous about whether a surprisingly stronger US economic data could force the Fed to start tapering its bond-buying program sooner rather than later. This, along with some repositioning trade ahead of Friday’s release of the US jobs report, prompted traders to lighten their bearish USD bets.

Bulls further took cues from a goodish pickup in the US Treasury bond yields, which was seen as another factor that underpinned the greenback. Next on tap will be the release of the ADP report on the US private-sector employment, followed by the usual Initial Weekly Jobless Claims and the ISM Services PMI.

The data might influence the USD price dynamics and provide some impetus to the USD/JPY pair. Apart from this, the US bond yields and the broader market risk sentiment might further assist traders to grab some short-term opportunities.

Technical levels to watch

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