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USD/JPY drops to fresh nine-month lows, 103.00 mark in sight

  • USD/JPY witnessed some follow-through selling for the third consecutive session on Thursday.
  • The downward trajectory was exclusively sponsored by sustained selling around the greenback.
  • The upbeat market mood might help limit the downside ahead of the BoJ meeting on Friday.

The USD/JPY pair continued losing ground through the first half of the European session and dropped to fresh multi-month lows, closer to the 103.00 mark in the last hour.

The pair prolonged this week’s bearish trend and witnessed some follow-through selling for the third consecutive session. The ongoing downfall was exclusively sponsored by the prevalent bearish sentiment surrounding the US dollar, which tumbled to fresh two-and-half-year lows amid prospects for additional US fiscal stimulus.

In fact, Republicans and Democrats in the US Congress were reportedly closing in on approving a $908 billion COVID-19 relief package. They are also working to pass a $1.4 trillion spending bill by Friday to prevent a government shutdown. This, along with dovish sounding FOMC statement, exerted additional pressure on the greenback.

At the final meeting of the year, the Fed showed a willingness to do more if needed and said that it will continue to support the economy through massive monetary stimulus. The US central bank also promised to keep interest rates near zero for years to come amid concerns about the ever-increasing coronavirus cases.

Meanwhile, the prevalent upbeat market mood did little to prompt any selling around the safe-haven Japanese yen, albeit might help limit any further downside for the USD/JPY pair. Investors might also refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of the latest Bank of Japan (BoJ) meeting on Friday.

That said, sustained weakness below the 103.00 mark might prompt some technical selling and turn the USD/JPY pair vulnerable to continue with its downward trajectory. Nevertheless, the bias still seems tilted in favour of bearish traders and the pair is more likely to slide further towards testing March daily closing lows, around the 102.35-30 area.

Technical levels to watch

 

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