USD/JPY holds above 106.40 despite DXY slide

• Dollar weakens during American session but holds on to gains versus JPY.  
• USD/JPY off lows but still down for the week, negative outlook.

The USD/JPY is approaching daily highs again, after finding support around 106.40. The pair peaked earlier after the beginning of the American session and following the US employment report at 106.71, the highest level in three days.

The dramatic April NFP numbers were expected by market participants. The greenback rose modestly but then turned to the downside. The US economy lost 20.5 million jobs, the worst report ever. Still, traders continue to focus on the future that does not seem bright at the moment. “As tragic as this number is, it comes as little surprise as more than 26 million individuals had filed for unemployment benefits between the March employment survey and the April survey. Sadly, there will be more job losses reported when the May report is published next month because seven million additional individuals have subsequently filed for unemployment benefits”, explained analysts at Wells Fargo.

Wall Street indexes are higher on Friday, extending weekly gains. Easing lockdown restrictions across the world boosted risk appetite. The yen was particularly hit by some optimism on Thursday and Friday, trimming gains against most of its rivals.

The US Dollar Index is up for the week, but off highs. It reversed on Thursday from weekly highs amid increasing expectations about negative rates from the Federal Reserve. It stands under 99.70, in the middle of the range of the last thirty days.

USD/JPY: Weekly chart shows bearish bias intact

The dollar is about to post the fourth weekly decline in a row. USD/JPY found support at 106.00 and bounced. The weekly chart continues to be biased to the downside, and a slide below 106.00 would keep the road open for 105.00.

On the flip side, USD/JPY will likely face resistance at 107.50. A close above the 20-WMA, currently at 108.60, would remove the bearish pressure.