- USD/JPY continued losing ground for the fifth consecutive session on Wednesday.
- Concerns about the ever-increasing COVID-19 cases in the US weighed on the USD.
- Softer risk tone benefitted the safe-haven JPY and contributed to the selling bias.
The USD/JPY pair edged lower through the early European session and slipped below the 104.00 mark, or seven-day lows in the last hour.
The pair extended its recent sharp pullback from the 105.65-70 supply zone and witnessed some follow-through selling for the fifth consecutive session on Wednesday. The downward trajectory was sponsored by a softer tone surrounding the US dollar and a slight deterioration in the global risk sentiment, which tends to underpin the safe-haven Japanese yen.
Concerns about the potential economic fallout from the imposition of fresh coronavirus restrictions in several US states kept the USD bulls on the defensive through the first half of the trading action on Wednesday. The greenback was further pressured by Tuesday’s softer US retail sales data and the ongoing downfall in the US Treasury bond yields.
Meanwhile, the continuous surge in COVID-19 cases tempered optimism around promising vaccine trials and took its toll on the global risk sentiment. This was evident from a fresh leg down in the equity markets, which drove investors towards traditional safe-haven assets, including the Japanese yen and exerted some additional pressure on the USD/JPY pair.
Apart from this, a sustained fall below the 104.00 mark further seemed to have prompted some technical selling and contributed to the USD/JPY pair’s intraday decline to the lowest level since November 9. Hence, some follow-through weakness back towards the recent daily closing lows, around the 103.35 region, en-route the 103.00 mark now looks a distinct possibility.
Market participants now look forward to the US housing market data – Building Permits and Housing Starts – for some impetus. This, along with developments surrounding the coronavirus saga and the broader market risk sentiment – will influence the USD price dynamics/safe-haven JPY and produce some meaningful trading opportunities around the USD/JPY pair.
Technical levels to watch
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