USD/JPY recovers early lost ground amid risk-on impulse, lacks bullish conviction

• USD/JPY recovered a major part of its intraday losses, though lacked follow-through buying.
• The risk-on impulse undermined the safe-haven JPY and extended some support to the pair.
• Subdued USD price action did little to provide any impetus and kept a lid on any further gains.

The USD/JPY pair attracted some dip-buying in the vicinity of mid-126.00s on Thursday and recovered a part of its early lost ground. The intraday uptick pushed spot prices back above the 127.00 mark during the early North American session, though lacked any follow-through.

The risk-on impulse - as depicted by a generally positive tone around the equity markets - undermined the safe-haven Japanese yen and was seen as a key factor that extended some support to the USD/JPY pair. That said, concerns about softening global economic growth kept a lid on the optimistic move, which, along with subdued US dollar demand acted as a headwind for the major.

Speculations that the Fed could pause the rate hike cycle later this year dragged the yield on the benchmark 10-year US government bond to a fresh six-week low. This, in turn, failed to assist the USD to capitalize on the overnight bounce from the monthly low. Even the mixed US macro data also did little to impress the USD bulls or provide any impetus to the USD/JPY pair.

The Prelim US GDP report showed that the world's largest economy contracted by a 1.5% annualized pace during the first quarter of 2022 as against the advance estimate for a 1.4% decline. The slight disappointment from the backwards-looking data, to some extent, was offset by better-than-expected US Weekly Initial Jobless Claims, which fell to 210K last week from the 218K previous.

Thursday's US economic docket also features the release of Pending Home Sales, though is unlikely to influence the buck or produce any meaningful trading opportunities around the USD/JPY pair. Meanwhile, spot prices, so far, have managed to hold above the monthly low. This, in turn, makes it prudent to wait for some follow-through selling before positioning for any further losses.

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