USD/JPY on a steady decline near 112.85, risk-off seeps back

• Softening risk sentiment underpinning the safe-haven Yen.
• Awaits flash PMIs from the US for fresh trading opportunities.

The USD/JPY pair is seen meandering near the lower bound of today’s trading range so far, with further downside likely amid softening risk sentiment that usually benefits the safe-haven Yen.

At the press time, the spot flirts with the daily lows near 112.80 levels, having finally broken the Asian consolidation just below the 113 handle. The latest leg down in the major can be mainly attributed to a renewed risk-aversion wave that gripped the markets amid a sell-off in the Chinese stocks and oil prices. China’s stock markets closed 2.5%–3% lower while WTI oil is losing 2.30%. Also, the Treasury yields are turning back into the red zone amid reduced demand for the higher-yielding assets.

Meanwhile, the offered tone around the US dollar keeps growing bigger, as we head into the European trading, further adding to the renewed weakness in USD/JPY. The greenback remains weighed down by increased doubts over the Fed’s rate hike outlook in the coming year.

The pair now awaits the US Markit flash manufacturing and services PMI reports due later in the NA session for fresh incentives. In the meantime, the risks trends and USD dynamics will continue to influence the price-movement, as holiday-thinned light trading will persist.

USD/JPY Technical Levels