USD/JPY snaps two-day uptrend above 110.00 amid sluggish markets

• USD/JPY fades bounces off intraday low, prints mild losses on a day.
• Market sentiment dwindles amid mixed clues concerning virus, US stimulus.
• US Treasury yields pause after rising for two consecutive days.
• Light calendar, pre-ECB trading lull test the pair’s moves.

USD/JPY fails to extend the previous two-day advances, down 0.08% intraday near 110.22, amid the initial hour of Thursday’s Tokyo open. The yen pair earlier followed the US Treasury yields and respected the US dollar gains, backed by a risk-off mood. However, the latest pullback lacks major catalysts to rely upon.

Although US Senators rejected opening debate on US President Joe Biden’s infrastructure spending plan, Democrats remain optimistic, including Biden, over the final passage of the deal. Also on the positive side were strong earnings that propelled Wall Street benchmarks for the second consecutive day.

Read: US President Biden: Yes we will reach an infrastructure deal

The same risk-on mood dragged the US Dollar Index (DXY) from April highs to snap a four-day rally. Even so, the US 10-year Treasury yields stayed up for the second consecutive day, recently sidelined around 1.29%.

It’s worth noting that Tokyo reports the highest covid figures since mid-January for Wednesday, per Kyodo News, which in turn pushed the Japanese government to tighten border controls and escalate checks as Olympics begin after a year’s delay. On the other hand, the UK boasts of antibodies in 90% of British people while Australia marked the biggest jump in daily infections to September 2020 levels the previous day.

Looking forward, a light calendar at home keeps USD/JPY traders clueless and seeking risk catalysts for fresh direction. Among them, coronavirus and US stimulus, not to forget budget talks, will be the key to follow. Above all, it’s the ECB day and hence the European policymakers’ economic outlook will be observed closely, as they’re more likely to keep the easy money flowing.

Read: ECB Preview: Three reasons why Lagarde could hit the euro when it is down

Technical analysis

Unless closing below a confluence of 50-DMA and previous resistance line from July 02, around 110.00, USD/JPY remains directed to the mid-month swing high around 110.65 ahead of challenging the 111.00 threshold and the monthly peak near 111.65.