On Thursday, the USD/JPY pair received some dip-buying around the 130.80-130.75 region and continued to steadily rise through the early part of the European session. 

While the pair seems to have stalled this week’s rejection slide from the 100-day Simple Moving Average (SMA), it struggles to maintain momentum beyond mid-131.00s.

The US Dollar (USD) has risen for the second consecutive day and seeks to build on the overnight modest recovery from a two-month low, which acts as a tailwind for the USD/JPY pair. In addition, stability in the equity markets undermines the safe-haven Japanese Yen (JPY) and further supports the major.

However, the USD bulls are cautious due to rising bets for a pause in the Federal Reserve’s (Fed) rate-hiking cycle. The market believes that the Fed’s inflation-fighting interest rate hikes are nearly done, and there is even an equal chance of a 25 bps lift-off at the May policy meeting and the possibility of rate cuts by year-end. 

These bets were reinforced by the release of the US ADP report on Wednesday, which indicated that private-sector employers added 145K jobs in March, below the expected 200K. The data suggested that the Fed’s efforts to cool the labor market could be having some impact.

The US Treasury bond yields remain low, which leads to the narrowing of the US-Japan rate differential and drives some flows toward the JPY, preventing any significant upside for the USD/JPY pair. 

Additionally, traders are hesitant ahead of the release of the US jobs data, or the NFP report on Friday. Meanwhile, the US Weekly Initial Jobless Claims may provide some momentum later during the early North American session on Thursday.


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