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  • USD/JPY witnessed a sharp turnaround from three-week tops set earlier this Wednesday.
  • Rising coronavirus cases weighed on the risk sentiment and benefitted the safe-haven JPY.
  • A modest pickup in the USD demand, surging US bond yields did little to lend any support.
  • Investors now look forward to the US macro data, FOMC minutes for fresh trading impetus.

The USD/JPY pair continued losing ground through the mid-European session and slipped below mid-107.00s, or fresh daily lows in the last hour.

The pair failed to capitalize on its early uptick to three-week tops – levels beyond the 108.00 round-figure mark – and witnessed a dramatic intraday turnaround on Wednesday. Investors remain concerned that a surge in new coronavirus cases across the world could trigger renewed lockdown measures to contain the spread and delay the global economic recovery.

This comes amid the risk of a further escalation of diplomatic tensions between the US and China – especially after the latter passed the Hong Kong security law – and dented the global risk sentiment. This was evident from a fresh leg down in the equity markets, which underpinned the safe-haven Japanese yen and prompted some aggressive long-unwinding trade around the USD/JPY pair.

The pair snapped five consecutive days of the winning streak and erased the previous day’s positive move. The sharp intraday downfall seemed rather unaffected by a modest pickup in the US dollar demand. A strong uptick in the US Treasury bond yields helped revive the USD demand, albeit did little to impress bullish trader or lend any support to the USD/JPY pair.

Moving ahead, market participants now look forward to the US economic docket – featuring the release of the ADP report on private-sector employment and ISM Manufacturing PMI. This coupled with minutes of the latest FOMC policy meeting will play a key role in influencing the USD price dynamics and provide some meaningful trading opportunities around the USD/JPY pair.

Technical levels to watch