- Sustained USD selling bias continued exerting pressure on USD/JPY.
- Break below the 38.2% Fibo. level accelerated the intraday decline.
- The trend-channel support might help limit further losses for the pair.
The USD/JPY pair added to its intraday losses and dropped to fresh seven-week lows, around the 107.60-55 region heading into the North American session.
The bearish bias surrounding the US dollar remained unabated amid expectations that the Fed will keep interest rates low for a longer period. Apart from this, growing worries about soaring COVID-19 cases in some countries benefitted the safe-haven Japanese yen and exerted some additional pressure on the USD/JPY pair.
Meanwhile, a sudden fall over the past hour or so could further be attributed to a fresh leg down in the US Treasury bond yields and technical selling below the 107.80 horizontal support. This marked the 38.2% Fibo. level of the 102.59-110.97 strong move up and might have already set the stage for additional weakness.
Looking at the broader picture, the recent pullback from the vicinity of the 111.00 mark, or one-year tops touched in March has been along a downward sloping channel. This further points to a well-established short-term bearish trend and supports prospects for an extension of the ongoing depreciating move.
That said, RSI (14) on the daily chart has moved on the verge of breaking into the oversold territory. Hence, any subsequent decline is more likely to be limited by the lower boundary of the trend channel. The mentioned support is pegged near the 107.40 region, which if broken should pave the way for a further decline.
On the flip side, any attempted recovery might now confront immediate resistance near the 38.2% Fibo. level, around the 107.80 region. This is closely followed by the 108.00 mark, above which a bout of short-covering has the potential to lift the USD/JPY pair further towards the trend-channel resistance, near mid-108.00s.
USD/JPY 4-hour chart
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Technical levels to watch
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