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  • USD/JPY traded with a negative bias amid a mildly softer tone surrounding the USD.
  • Biden inched closer to winning the US presidential election and weighed on the USD.
  • The upbeat market mood undermined the safe-haven JPY and helped limit the slide. 

The USD/JPY pair remained depressed through the first half of the trading action on Thursday, albeit lacked any strong follow-through and was last seen trading around the 104.35-40 region.

Following the previous day’s sharp movement in both directions, the pair met with some fresh supply and was being pressured by a softer tone surrounding the US dollar. Democrat candidate Joe Biden won the key battleground states of Wisconsin and Michigan, raising his electoral count to 264 versus 270 required to declare victory. This was seen as one of the key factors weighing on the greenback.

That said, the final outcome of the US election now hangs on the vote count from a few remaining swing states. Moreover, Trump has already pursued lawsuits and a recount in Pennsylvania and Michigan. The heightened uncertainty could prolong for days or even weeks, which extended some support to the safe-haven Japanese yen and further contributed to the offered tone surrounding the USD/JPY pair.

Meanwhile, the failure to achieve a Democrat sweep of the Senate and House of Representatives dampened prospects for big stimulus packages to aid the COVID-19 hit economy. This was evident from the ongoing fall in the US Treasury bond yields, which further undermined the greenback demand. However, the upbeat market mood helped limit deeper losses for the USD/JPY pair, at least for the time being.

Even from a technical perspective, the pair has been showing some resilience near the 104.00 mark. This warrants some caution for bearish traders and makes it prudent to wait for a sustained break below the mentioned level before positioning for any further near-term depreciating move. Nevertheless, US political developments will continue to play a key role in influencing the USD/JPY pair.

Thursday’s US economic docket features the release of the usual Initial Weekly Jobless Claims. The data, however, is unlikely to provide any meaningful impetus and the key focus will remain on the latest FOMC monetary policy update, due later during the US session.

Technical levels to watch