Today in the European trading session, the USD/JPY currency pair succeeded in breaking its previous session thin trading range and rose well above the 106.00 mark. That was mainly due to the broad-based U.S. dollar strength, buoyed by the emerging signs of a U.S. economic recovery, witnessed after the Tuesday released U.S. better-than-expected manufacturing data. The U.S. dollar gains were further bolstered by talks between the House of Speak Nancy Pelosi and Treasury Secretary Steve Mnuchin over the U.S. stimulus package.
The upbeat market sentiment, supported by the optimism that the U.S. policymakers are revealing signs to continue discussions about the stimulus package, weakened the safe-haven Japanese yen and committed to the pair's gains. In the meantime, the risk-on market sentiment was additional, supported by vaccine support. On the contrary, the US-China tussle could be considered the key factor that capped the currency pair's further upside momentum.
Despite concerns about the coronavirus cases in some nations and worsening US-China relations, the investors continued to cheer the hopes of the U.S. fiscal stimulus package triggered by reports that the policymakers will soon end the stimulus deadlock. These hopes came after the U.S. House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin acknowledged for stop-gap funding to administer the government offices open even after the current bill expires on September 30. In turn, this undermined the safe-haven Japanese yen currency and extended some support to the currency pair.
Moreover, the upbeat market sentiment was being supported by Tuesday's released U.S. better-than-expected manufacturing data. Also supporting the trading sentiment could be the optimism concerning the coronavirus (COVID-19) vaccine. However, the market traders seem cautious and refrained from placing any strong position as they keenly await the American employment figures.
On the contrary, the long-lasting tussle between the world's two largest economies remained on the cards as China took revenge from the U.S. while giving warning that we are considering to cut its American debt holdings. This step has taken by China after the Trump administration announced extra hardships for Beijing diplomats. This eventually exerted downside pressure on the trading sentiment and capped further upside momentum in the U.S. stock futures. However, these headlines could be considered the key factor that capped the currency pair's further upside momentum.
At the USD front, the broad-based U.S. dollar succeeded in gaining positive traction and edged higher amid mixed sentiment. The U.S. dollar gains were further bolstered by the ongoing upsurge in the U.S. Treasury bond yields. However, the U.S. dollar's modest gains became the major factor that kept the currency pair higher. Whereas, the U.S. Dollar Index Futures that tracks the greenback against a bucket of currencies inched up at 92.47 by 10:23 PM ET (2:23 AM GMT).
Moving on, the August month's employment data for the U.S., which is scheduled to release at 12:30 GMT, will be key to watch on the day. The headline U.S. Nonfarm Payrolls (NFP) data is expected to drop to 1400K against 1763K prior, while the Unemployment Rate may fall from 10.2% previous to 9.8%. As well as, the coronavirus (COVID-19) updates, U.S. stimulus news, and the US-China tensions could not lose their importance on the day.
Daily Support and Resistance
S1 105.48, S2 105.82, S3 106.02
Pivot Point 106.16
R1 106.35, R2 106.5, R3 106.84