Search ForexCrunch
  • USD/JPY slid below the 104.00 level on Thursday amid a broad continuation of USD weakness.
  • The pair has now broken a medium-term uptrend, which could open the door for a test of November lows.

USD/JPY has slipped beneath the 104.00 mark in recent trade, setting lows at 103.68 before reversing back to current levels around 103.80. On the day, the pair trades roughly 0.6% or 60 pips lower.

No end in sight just yet to the broad US dollar decline

USD is yet to see anything resembling respite, with the Dollar Index (DXY) on course for its third day of losses. Losses have been steep on Thursday, with the DXY dropped to lows around 90.50 from opening the day above 91.00; no specific catalysts appeared directly responsible for USD’s early in the day (just a continuation of fiscal stimulus and vaccine optimism?), though a recent batch of strong US services PMI data for November appears to have spurred further losses;

Markit released its final services PMI reading for November, which was revised higher to 58.4 from the preliminary estimate of 57.7, the highest reading in over five years. Shortly after, the Institute of Supply Management released their estimate of services PMI for November, which came in at a solid 55.9, only very marginally below expectations for 56.0. Importantly, the employment subindex remained above the 50 mark, implying that service sector employment was in expansion in the month just gone despite the worsening virus situation.

Going into the data, some had argued that strong numbers might be USD bullish as it might discourage the Fed from providing further accommodation at the FOMC meeting later this month. However, what we ended up seeing was more of a risk on reaction to the data, where stocks and risk-sensitive currencies rallied while USD fell.

USD/JPY breaks below medium-term uptrend, defies opex barrier

USD/JPY has broken below a medium-term uptrend linking the 6, 23 and 30 November lows which came into play (and failed) as resistance just above the psychological 104.00 level. Also at that level is 3.4B in options expiring at Thursday’s NY cut. The combination of these resistance factors was not enough to prevent bearish USD sentiment driving the pair lower. USD/JPY does seem to have, in the meantime, found resistance just above the 18 November low at 103.66. If this level goes, a test of the November low at 103.19 is likely to come next.