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  • USD/JPY remains on the back foot for third consecutive day, probes one week low.
  • DXY drops to fresh low since April 2018 amid mild risk-on, fears of virus woes in the US and Japan.
  • Markets in Japan are off today, Japan’s Nishimura earlier warned over the national emergency.
  • US jobless data, risk catalyst to keep the driver’s seat.

USD/JPY drops to the intraday low of 103.08, down 0.17% on a day, during the early Thursday’s trading. The yen pair ignores off in Japan while cheering the US dollar weakness.

The US dollar index (DXY) drops to the fresh multi-month low of 89.51, down 0.10% intraday, by press time. The cautious optimism over the US coronavirus (COVID-19) stimulus and vaccine favor, coupled with the passage of the Brexit deal, exerts an initial burden on the greenback. Also challenging the USD could be the two cases of covid strain, in Colorado and California respectively, that earlier shook the UK.

Meanwhile, USD/JPY is also considered as a risk barometer and hence its weakness suggests challenges to the sentiment. Recently, the US sent two aircraft to the Middle East and Taiwan Strain and the same can renew geopolitical tension. Further, the comments from Japanese Economy Minister Nishimura also highlight fears of a national emergency considering the latest jump in the virus cases.

It should be noted that the markets in Japan are off for four days but the S&P 500 Futures print 0.10% intraday gains while following the Wall Street benchmarks and portray a mild risk-on mood.

Considering the lack of major data/events, coupled with a close in multiple markets due to New Year’s Eve, USD/JPY traders are less likely to deviate from the current downtrend. However, any drastic changes from the US Congress, relating to the $2,000 paycheck, or a surprise drop in weekly US jobless claims, can trigger an intermediate bounce of the quote.

Technical analysis

Unless breaking the 21-day SMA level of 103.71, USD/JPY bears are less likely to refrain from challenging the monthly low, also the lowest since March, near 102.87.