- USD/JPY failed to capitalize on the overnight upsurge of nearly 400 pips.
- A fresh leg down in the US bond yields kept the USD bulls on the defensive.
- Reviving safe-haven demand benefitted the JPY and added to the selling bias.
The USD/JPY pair refreshed session lows in the last hour, albeit managed to defend the 104.00 mark and quickly recovered around 30-40 pips thereafter.
The pair met with some fresh supply during the Asian session on Wednesday and eroded a part of the previous day’s strong rally of nearly 400 pips, supported by resurgent US dollar demand and a strong recovery in the global risk sentiment.
USD/JPY weighed down by a combination of factors
Hopes of fiscal stimulus by the Trump administration boosted investors’ appetite for riskier assets on Tuesday, which allowed the US Treasury bond yields to rebound sharply from historic lows and helped revive the USD demand.
However, US President Donald Trump delayed the announcement of an economic stimulus package. This coupled with persistent worries over the coronavirus epidemic extended some support to the Japanese yen’s safe-haven status.
The anti-risk flow was further reinforced by a fresh leg down in the US equity futures and the US bond yields, which kept the USD bulls on the defensive and turned out to be one of the key factors exerting some pressure on the major.
Meanwhile, the downside remained cushioned, at least for the time being, as investors now seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of the latest US inflation figures and the US budget for fiscal 2021.
The US Treasury Secretary Steven Mnuchin will testify on the Proposed Fiscal Year 2021 Budget, which might provide further details about the administration’s new policies and play a key role in influencing the near-term USD price dynamics.
Technical levels to watch