Image Credit: CNBC

The Japanese Yen (JPY) maintains a bullish outlook heading into Thursday's European session, though it lacks momentum and remains near a one-week low against the US Dollar (USD) from the previous day. The fading optimism for a swift resolution to the US-China trade dispute, coupled with expectations of a trade deal between Japan and the US and speculation about more interest rate hikes by the Bank of Japan (BoJ), is supporting demand for the safe-haven JPY.

At the same time, the possibility of more aggressive policy easing by the Federal Reserve (Fed) stands in stark contrast to the hawkish outlook for the BoJ, further bolstering the lower-yielding JPY. The US Dollar, however, is struggling to capitalize on a slight recovery from its multi-year low and is contributing to the softer tone of the USD/JPY pair. Despite this, a positive risk sentiment is limiting further gains for the JPY bulls.

Technically, the overnight close above the 23.6% Fibonacci retracement level from the March-April decline and the 143.00 mark is seen as a key bullish signal for USD/JPY. Oscillators on the hourly charts are gaining positive momentum, supporting the potential for dip-buying near the 142.45-142.40 region. This should help limit the downside near the 142.00 level, with the risk of a further slide to the mid-141.00s. A drop below 142.00 could lead to a test of the 140.50 support and the multi-month low below the 140.00 mark.

Conversely, a rise above the 143.00 mark may face resistance near 143.55 or the recent swing high. Further buying momentum could push USD/JPY above 144.00, heading towards the 144.35 confluence, which includes the 38.2% Fibonacci level and the 200-period Simple Moving Average (SMA) on the 4-hour chart. A decisive break above this area could signal a meaningful recovery in the near term.

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