The USD/JPY pair maintained its offered tone
The USD/JPY pair maintained its offered tone through the early North American session, albeit has managed to rebound a few pips from the daily low. The pair was last seen trading around the 127.40-127.35 region, still down over 0.40% for the day. The worsening global economic outlook continued weighing on investors' sentiment and triggered a fresh wave of the risk-aversion trade. This, in turn, boosted demand for traditional safe-haven currencies, including the Japanese yen, and exerted downward pressure on the USD/JPY pair. The anti-risk flow was reinforced by a fresh leg down in the US Treasury bond yields, which further inspired bearish traders and dragged spot prices back closer to the monthly low.
The downside, however, remains cushioned, at least for the time being, amid the emergence of some US dollar buying at lower levels. Apart from this, a big divergence in the monetary policy stance adopted by the Bank of Japan (dovish) and the Fed (hawkish) assisted the USD/JPY pair to find some support ahead of the 127.00 round-figure mark. This, in turn, makes it prudent to wait for strong follow-through selling before positioning for any further depreciating move. Market participants now look forward to the US economic docket - featuring the releases of the flash PMI prints for May, New Home Sales, and Richmond Manufacturing Index. This, along with Fed Chair Jerome Powell's speech and the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities.