USD/JPY retreats modestly from weekly highs, trades around 106.40

• USD/JPY touched a fresh weekly high of 106.56 on Thursday.
• US Dollar Index fell below 93.00 after US data.
• Focus shifts to Markit and ISM Services PMI data. 

The USD/JPY pair rose to its highest level in a week at 106.56 on Thursday but edged slightly lower in the early American session. As of writing, the pair was up 0.2% on the day at 106.40.

USD weakens modestly after mixed US data

The initial market reaction to the macroeconomic data releases from the US caused the US Dollar Index (DXY) to retreat below 93.00.

The weekly report published by the US Department of Labor showed that Initial Jobless Claims declined by 130,000 to 881,000. This reading came in slightly better than the market expectation of 950,000. Other data from the US revealed that Unit Labor Costs in the second quarter rose by 9%, compared to analysts' estimate of 12.1%, and the trade deficit widened to $63.6 billion in July from $53.5 billion in June. 

At the moment, the DXY is up 0.2% on the day at 92.85. Later in the session, the IHS Markit and the ISM will release the Services PMI reports. 

Meanwhile, the S&P 500 futures are down 0.6% on the day and a selloff in major US equity indexes could help the JPY find demand as a safe-haven and continue to cap USD/JPY's upside.

Technical levels to watch for

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