USD/JPY climbs further beyond 145.00 mark, fresh daily peak amid positive risk tone

• USD/JPY attracts some dip-buying on Thursday, though lacks any follow-through.
• Looming recession risks lend support to the safe-haven JPY and act as a headwind.
• The uncertainty over the Fed's rate-hike path also contributed to capping the upside.

The USD/JPY pair regains positive traction during the Asian session on Thursday and snaps a two-day losing streak to a one-and-half-week low, around mid-144.00s touched the previous day. Spot prices currently trade just above the 145.00 psychological mark, up nearly 0.25% for the day, though the fundamental backdrop warrants some caution before positioning for any further gains.

A generally positive tone around the Asian equity markets is seen undermining the safe-haven Japanese Yen (JPY) and acting as a tailwind for the USD/JPY pair. Hopes for more stimulus measures from China, along with signs of easing US-China trade tensions, boost investors' confidence. It is worth recalling the US Commerce Department’s Bureau of Industry and Security (BIS) announced earlier this week that it is removing 27 Chinese entities from its Unverified List. China welcomed the move and said that it was conducive to normal trade between the two nations.

Apart from this, a big divergence in the monetary policy stance between the Bank of Japan (BoJ) and other major central banks contributes to the bid tone surrounding the major. In fact, the BoJ is the only central bank in the world to maintain negative interest rates. Moreover, policymakers have emphasised that a sustainable pay hike is a prerequisite to consider dismantling the massive monetary stimulus. That said, looming recession risks lend some support to the JPY and keep a lid on any further gains for the USD/JPY pair, warranting caution for bullish traders.

Against the backdrop of the worsening economic conditions in China, a host of manufacturing surveys on Wednesday painted a grim picture of the health of economies across the world and fueled concerns about a deeper global economic downturn. Adding to this, the flash US PMI prints showed that business activity approached the stagnation point in August. This, in turn, forced investors to trim their bets for further policy tightening by the Federal Reserve (Fed), which keeps the US Dollar (USD) below a more than two-month high touched on Wednesday and caps the USD/JPY pair.

Investors, however, remain uncertain about the timing when the Fed will pause its rate-hiking cycle or start cutting rates. Hence, the market focus will remain glued to the crucial Jackson Hole Symposium, where comments by Fed Chair Jerome Powell will be closely scrutinized for cues about the future rate-hike path. This will influence the USD price dynamics and determine the next leg of a directional move for the USD/JPY pair. In the meantime, traders will take cues from the US macro data - Weekly Jobless Claims and Durable Goods Orders - for some impetus later this Thursday.

Technical levels to watch