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  • USD/JPY met with some fresh supply on Monday and retreated sharply from over two-month tops.
  • The USD failed to preserve the post-NFP gains and was seen as a key factor weighing on the pair.
  • Technical selling below the 109.00 mark further seemed to have aggravated the bearish pressure.

The USD/JPY pair extended its intraday downfall and tumbled to fresh daily lows, around the 108.65 region during the early North American session.

The pair failed to capitalize on its recent strong momentum to the highest level since March 26 and witnessed a sharp turnaround on the first day of a new trading week. The downfall, marking the USD/JPY pair’s first day of a negative move in the previous five, lacked any obvious fundamental catalyst and could be solely attributed to some aggressive long-unwinding trade.

As investors looked past Friday’s blockbuster US monthly jobs report, the US dollar came under some renewed selling pressure and was seen as one of the key factors exerting some pressure on the USD/JPY pair. Meanwhile, the latest leg of a sudden drop over the past hour or so could further be attributed to a sharp intraday slide in the US Treasury bond yields.

The downfall seemed rather unaffected by the upbeat market mood, which tends to undermine demand for the traditional safe-haven currencies, like the Japanese yen. The global risk sentiment remained well supported by growing optimism over a potential V-shaped global economic recovery and firming expectations that the worst of the coronavirus pandemic is over, albeit failed to impress bulls.

The intraday slide took along some short-term trading stops near the 109.00 round-figure mark, which further seemed to have aggravated the bearish pressure surrounding the USD/JPY pair. It will now be interesting to see if the fall is seen as a buying opportunity or indicates that the pair might have already topped out in the near-term, setting the stage for further weakness.

Technical levels to watch

 

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