USD/JPY steadies above 107 after renewing two-week lows

• Wall Street's main indexes suffer heavy losses on Wednesday.
• Better-than-expected ADP jobs data fail to help the market sentiment improve.
• US Dollar Index gains traction in late American session.

The USD/JPY pair dropped to its lowest level since March 18th at 107 on Wednesday but staged a modest rebound in the last hour on the back of broad-based USD strength. As of writing, the pair was trading at 107.25, erasing 0.27% on a daily basis.

The JPY gathered strength against its major rivals as the risk-averse environment ramped up the demand for safe-haven assets. Reflecting the intense flight-to-safety, Wall Street's three main indexes are down between 3.5% and 4.2% on the day while the 10-year US Treasury bond yield, which lost more than 10% earlier in the day, was erasing 6.5%.

DXY climbs higher toward 100

Earlier in the day, the data published by the ADP showed that the private sector employment in the US declined by 27,000 in March. Furthermore, the ISM's Manufacturing PMI fell to 49.1 from 50.1 in March. Although both of these readings came in much better than analysts' estimates, the market sentiment remained largely unchanged.

The fact that these reports are conducted using data through mid-March suggests that the readings don't show the full impact of the coronavirus outbreak on the economy. Hence, the US Dollar Index (DXY) largely ignored these figures and spent the first half of the American session in a narrow range above 99.50 before gaining traction in the last hour. At the moment, the DXY is up 0.9% on the day at 99.85, helping the pair limit its losses. 

There won't be any significant macroeconomic data releases from Japan on Thursday and the risk perception is likely to continue to drive the pair's action during the Asian session.

Technical levels to watch for