USD/JPY drops to over six-month lows, fast approaching 104.00 mark

• USD/JPY witnessed some follow-through selling for the sixth consecutive session on Monday.
• The USD was being pressured by fading hopes of another round of the fiscal stimulus measures.
• Resurgent COVID-19 cases benefitted the safe-haven JPY and contributed to the offered tone.

The USD/JPY pair remained depressed for the sixth consecutive session on Monday and dropped to its lowest level since March 13th, around the 104.15 region.

The pair failed to capitalize on the previous session’s modest bounce of around 30 pips, instead met with some fresh supply on the first day of the new trading week. The downtick was sponsored by the prevalent US dollar selling bias and reviving safe-haven demand.

Worries that the lack of additional fiscal stimulus measures could hinder the current US economic recovery largely negated last week’s not so dovish FOMC monetary policy statement. This, in turn, kept the USD bulls on the defensive and exerted pressure on the USD/JPY pair.

On the other hand, concerns about the ever-increasing number of coronavirus cases weighed on investors sentiment. This was evident from a weaker tone around the equity markets, which benefitted the safe-haven Japanese yen and contributed to the USD/JPY pair’s downfall.

Meanwhile, a goodish pickup in the US Treasury bond yields failed to impress bullish traders, albeit might turn out to be the only factor lending some support to the USD/JPY pair. Investors might also be reluctant to place fresh bets ahead of the Fed Chair Jerome Powell’s speech later this Monday.

Moreover, slightly oversold conditions on short-term charts further warrant some caution before positioning for any further depreciating move. Hence, any subsequent fall is more likely to find decent support and remain limited near the 104.00 round-figure mark.

Technical levels to watch