- USD/JPY witnessed follow-through selling for the second consecutive session on Wednesday.
- The offered tone surrounding the USD was seen as a key factor exerting pressure on the major.
- The prevalent upbeat market mood might undermine the safe-haven JPY and help limit losses.
The USD/JPY pair continued losing ground through the Asian session and dropped to over one-week lows, around the 103.25 region in the last hour.
The pair extended this week’s retracement slide from the vicinity of the 104.00 mark and witnessed some follow-through selling for the second consecutive session on Wednesday. The downfall was exclusively sponsored by the heavily offered tone surrounding the US dollar, which tumbled to fresh multi-year lows amid increasing bets about the likelihood of additional financial aid in the US.
The USD bearish pressure remained unabated after Senate Majority Leader Mitch McConnell on Tuesday blocked an effort to hold an immediate vote to increase the direct payments from $600 to $2,000. The development, to a larger extent, was offset by the US Treasury Secretary Steve Mnuchin’s announcement that qualified Americans could begin receiving the direct stimulus payment of $600 from Tuesday night.
Meanwhile, expectations for a strong global economic recovery in 2021 remained supportive of the prevalent upbeat market mood. The risk-on flow was evident from the underlying bullish sentiment around the global equity markets. This might undermine demand for the safe-haven Japanese yen and help limit the downside for the USD/JPY pair amid thin trading volumes on the back of year-end holiday.
Market participants now look forward to second-tier US economic data – Goods Trade Balance, Chicago PMI and Pending Home Sales – for some impetus. Apart from this, the broader market risk sentiment and the USD price dynamics might further contribute to produce some short-term opportunities around the USD/JPY pair.
Technical levels to watch
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