- The US political uncertainty continued weighing on the USD and capped the early uptick for USD/JPY.
- The cautious market mood benefitted the safe-haven JPY and prompted some selling at higher levels.
- The downside remains cushioned as investors await US political developments, US monthly jobs data.
The USD/JPY pair struggled to register any meaningful recovery and remained well within the striking distance of multi-month lows set earlier this Friday, around the 103.35 region.
The pair failed to capitalize on its attempted Asian session bounce to the 103.75 region, instead met with some fresh supply and dropped to the lowest level since March 12. The early uptick was supported by a modest pickup in the US dollar demand, though the prevalent cautious mood undermined the safe-haven Japanese yen and capped the upside for the USD/JPY pair.
Meanwhile, the USD lacked any strong follow-through buying amid the increasing likelihood of the Democrat Joe Biden becoming the next president. However, a victor is yet to be declared and the final outcome hangs on the vote count from a few remaining battleground states. Moreover, a contentious US presidential election has diminished hopes for large stimulus packages.
The combination of factors held traders from positioning for big movements in either direction, which, in turn, seemed to be the only factor that, so far, has helped limit any deeper losses. The USD/JPY pair was last seen hovering near mid-103.00s as market participants now look forward to the release of the closely watched US monthly employment details.
The NFP report, along with US political developments, will influence the USD price dynamics. Apart from this, the broader market risk sentiment will also play a key role in driving the USD/JPY pair and produce some meaningful trading opportunities on the last day of the week.
Technical levels to watch
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