USD/JPY bounces off weekly low, remains below 130.00 as traders await US Q4 GDP

• USD/JPY reverses an intraday dip to a fresh weekly low, albeit lacks follow-through.
• A mildly positive tone undermines the safe-haven JPY and lends support to the pair.
• Bets for smaller Fed rate hikes keep the USD bulls on the defensive and cap gains.
• Traders also seem reluctant to place aggressive bets ahead of the US Q4 GDP print.

The USD/JPY pair finds some support near the 129.00 round-figure mark and recovers around 70-80 pips from the weekly low touched earlier this Thursday. Spot prices refreshe daily peak during the early part of the European session, albeit seem to struggle to capitalize on the move and remain below the 130.00 psychological mark.

A combination of factors undermines the Japanese Yen (JPY), which, in turn, offers some support to the USD/JPY pair. The Bank of Japan (BoJ), in its Summary of Opinions published this Thursday, said that it wants to maintain the current monetary policy settings, including the Yield Curve Control (YCC). This, along with a mildly positive tone around the equity markets, drives some flows away from the safe-haven JPY.

Meanwhile, fresh speculation that high inflation may invite a more hawkish stance from the BoJ later this year helps limit losses for the JPY. The US Dollar, on the other hand, languishes near an eight-month low amid the prospects for a less aggressive policy tightening by the Fed and rising bets for a smaller 25 bps rate hike in February. This, in turn, acts as a headwind for the USD/JPY pair and caps the upside.

Traders also seem reluctant and prefer to wait on the sidelines ahead of the Advance US Q4 GDP print, due later during the early North American session. Thursday's US economic docket also features Durable Goods Orders and New Home Sales data, which might influence the USD price dynamics. Apart from this, the broader market risk sentiment will be looked upon for short-term trading opportunities around the USD/JPY pair.

Technical levels to watch