- USD/JPY witnessed some heavy selling for the second straight session on Tuesday.
- A cautious mood around the equity markets underpinned for the safe-haven JPY.
- Dovish Fed expectations, sliding US bond yields further added to the selling bias.
- The ongoing downfall seemed unaffected by a goodish pick up in the USD demand.
The USD/JPY pair added to the previous day’s heavy losses and remained under some heavy selling pressure for the second straight session on Tuesday. The downward trajectory extended further below the 108.00 round-figure-mark, dragging the pair to one-week lows in the last hour.
The pair stalled its recent bullish trajectory to the highest level since March 26 and witnessed a dramatic turnaround on the first day of a new trading week. The pullback extended through the Asian session on Tuesday and was pressured by reviving demand for the safe-haven Japanese yen.
The global equity markets took a breather following the recent strong rally and provided a modest lift to traditional safe-haven currencies. Bearish traders further took cues from a fresh leg down in the US Treasury bond yields, which contributed to the USD/JPY pair’s downward trajectory.
Investors also seemed to price in the possibility of a very dovish outlook from the Fed at the end of a two-day meeting on Wednesday, which seemed to have largely offset a goodish pickup in the US dollar. This, in turn, failed to extend any support to the USD/JPY pair.
Tuesday’s downfall could further be attributed to some follow-through technical selling below the very important 200-day SMA. The pair dropped to retest a previous trading range resistance breakpoint, near the 107.85 region, which should now act as a key pivotal point for short-term traders.
Technical levels to watch
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