- USD/JPY came under some intense selling pressure on Wednesday and slipped below 105.00 mark.
- A sharp turnaround in the equity markets benefitted the safe-haven JPY and exerted heavy pressure.
- The offered tone surrounding the USD did little to lend any support or stall the steep intraday decline.
The USD/JPY pair witnessed some heavy selling during the early European session and dived to fresh monthly lows, below the key 105.00 psychological mark in the last hour.
A sharp turnaround in the global risk sentiment forced investors to take refuge in traditional safe-haven currencies, including the Japanese yen. This comes on the back of the bearish sentiment surrounding the US dollar, which, in turn, was seen as a key factor behind the USD/JPY pair’s steep intraday decline to the lowest level since September 23.
The latest optimism over additional US fiscal stimulus measures faded rather quickly and was evident from a fresh leg down in the equity markets. Hopes for a pre-election US stimulus package revived after the US President Donald Trump said that he was willing to accept a larger aid bill despite opposition from his own Republican Party.
Trump’s remarks raised prospects for more government borrowing and sparked a selloff on the US bonds. The lack of demand for government debt was seen as another factor that exerted some additional downward pressure on the greenback.
The downward momentum took along some short-term trading stops placed near the 105.00 level, setting the stage for a further intraday depreciating move. Hence, some follow-through weakness towards the 104.45 intermediate support, en-route September monthly swing lows near the 104.00 mark, now looks a distinct possibility.
There isn’t any major market-moving US economic data due for release on Wednesday. Hence, the broader market risk sentiment, along with the USD price dynamics and developments surrounding the US fiscal stimulus will play a key role in influencing the USD/JPY.
Technical levels to watch
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