Earlier today, the USD/JPY currency pair failed to extend its Friday's bullish moves and dropped from the two-month high to below mid-109.00 level, mainly due to the broad-based U.S. dollar selling bias triggered by the risk-on market sentiment. On the other hand, the risk-on market sentiment triggered by the multiple factors undermined the safe-haven Japanese yen and became one of the major factors that kept a lid on any additional losses in the pair least for now.
The reason for the risk-on market sentiment could be attributed to the NFP headline, which showed that the U.S. economy surprisingly marked 2.509 million jobs in May as compared to the consensus estimate. The NFP figure pointed to a fall of 8 million jobs as well as the upbeat trading sentiment was further bolstered by the improvement in the jobless rate, which just dropped to 13.3% as against a big jump expected by 19.8% from 14.7% in April.
On the other hand, the hopes for a sharp V-shaped recovery for the global economic recovery also boosted the risk-on market sentiment, undermining the demand for the safe-haven asset like Japanese yen and contributing to limiting the currency pair's daily losses. Elsewhere, the reason for the upbeat trading sentiment could be associated with the expectations that the worst part of the coronavirus pandemic was over, which ultimately helped to put a lid on any deeper losses for the USD/JPY pair.
At the USD front, the broad-based U.S. dollar drew offers on the day as investors withdrew their money from the safe-haven assets after Friday's shock rise in U.S. employment, which eventually turned on risk sentiment and undermined the JPY. Whereas, the U.S. dollar index, which tracks the greenback against a basket of six other currencies, was mostly flat at 96.888, having dropped nearly 3% over the last month. Looking forward, due to the absence of major data/events from the U.S., markets traders will keep their eyes on the COVID-19 and US-China tussle updates for fresh impetus concerning the pair.
Daily Support and Resistance
Pivot Point 109.51
The USD/JPY pair has violated the upward trendline and 50 periods of EMA, supporting the pair around 109 and 108.400 level. Closing of candles below this level can extend selling until the next support area of 107.940, and below this, the next support holds around 107.200. Let's wait for the market to retrace back upward until 108.600 level before taking another sell position today. Good luck!