- USD/JPY remained under some selling pressure for the fifth straight session on Wednesday.
- Concerns about surging COVID-19 cases weighed on the buck and exerted some pressure.
- Optimism over a potential vaccine, positive tone in the equity markets helped limit losses.
The USD/JPY pair maintained its offered tone through early North American session and was last seen hovering near the lower end of its daily trading range, below the 104.00 mark.
The pair extended last week’s pullback from the 105.65-70 region and witnessed some follow-through selling for the fifth consecutive session on Wednesday. Concerns about the economic fallout from the imposition of new COVID-19 restrictions in several US states kept the US dollar bulls on the defensive. This, in turn, was seen as a key factor that continued exerting some pressure on the USD/JPY pair.
However, the optimism about promising vaccine trial results and indications of a positive opening in the US equity markets undermined the safe-haven Japanese yen. This, along with a goodish rebound in the US Treasury bond yields extended some support to the greenback and helped limit any further losses for the USD/JPY pair. That said, the lack of any meaningful buying interest supports prospects for additional weakness.
On the economic data front, mixed US housing market data – Building Permits and Housing Starts – did little to impress the USD bulls or provide any meaningful impetus to the USD/JPY pair. Hence, some follow-through downfall back towards the recent daily closing lows support, around the 103.35 region en-route the 103.20-15 region, still looks a distinct possibility.
Meanwhile, any attempted recovery move will now be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 104.35 congestion zone. In the meantime, developments surrounding the coronavirus saga will continue to influence the broader market risk sentiment and produce some meaningful trading opportunities around the USD/JPY pair.
Technical levels to watch
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