USD/JPY flirts with session lows, just below mid-103.00s

• USD/JPY met with some fresh supply on Wednesday and eroded a part of the overnight gains.
• A softer risk tone benefitted the safe-haven JPY and exerted some pressure amid weaker USD.
• Trump’s threat not to sign the stimulus bill, COVID-19 jitters weighed on investors’ sentiment.

The USD/JPY pair edged lower through the Asian session and was last seen hovering near the lower end of its daily trading range, just below mid-103.00s.

A combination of negative factors failed to assist the pair to capitalize on the previous day’s positive move, instead prompted some fresh selling on Wednesday. A softer risk tone underpinned the Japanese yen’s safe-haven demand. This, along with the emergence of some fresh selling around the US dollar, exerted some pressure on the USD/JPY pair.

Sentiment remained fragile amid the discovery of a new fast-spreading coronavirus variant and the imposition of strict lockdowns/travel restrictions in the UK. Adding to this, the US President Donald Trump threatened not to sign a long-awaited $892-billion coronavirus relief bill, which further dented investors’ appetite for perceived riskier assets.

On the other hand, the greenback trimmed a part its recent recovery gains and remained depressed through the first half of the trading action on Wednesday. This was seen as another factor that contributed to the USD/JPY pair’s downtick. Bearish traders further took cues from a modest pullback in the US Treasury bond yields, though lacked conviction.

Looking at the broader picture, the USD/JPY pair remained well within this week’s broader trading range. This, in turn, warrants some caution for aggressive traders and before positioning for a firm near-term direction. Market participants now look forward to the release of Durable Goods Orders and Initial Weekly Jobless Claims data from the US for a fresh impetus.

Technical levels to watch