USD/JPY struggles near 4-1/2 month lows, below mid-104.00s

• USD/JPY remained under some heavy selling pressure for the seventh consecutive session.
• The prevalent bearish sentiment around the USD was seen as a key factor exerting pressure.
• Growth concerns, fiscal impasse, declining US bond yields continued weighing on the buck.
• Extremely oversold conditions helped the pair to hold above 104.00 mark, at least for now.

The USD/JPY pair maintained its offered tone through the early European session and was last seen trading near the lowest level since March 12, below mid-104.00s.

The pair added to its recent losses and continued losing ground for the seventh consecutive session on Friday amid the prevalent bearish sentiment surrounding the US dollar. Against the backdrop of a more dovish FOMC statement on Wednesday, doubts over the US economic recovery continued exerting some heavy pressure on the greenback.

Investors remain worried that the economic recovery in the US could be grinding to a halt in the wake of the continuous surge in new coronavirus cases. The market concerns were further fueled by Thursday’s advance US GDP report, which showed that the economy contracted by a record 32.9% annualized pace during the second quarter of 2020.

Adding to this, the impasse over the next round of the US fiscal stimulus further pressured the already weaker greenback. Congressional Republicans and Democrats have been struggling to reach a consensus on fiscal spending plans ahead of the expiry of the existing enhanced unemployment provisions on Friday.

Bearish traders further took cues the ongoing slide in the US Treasury bond yields. However, a modest uptick in the US equity futures undermined the Japanese yen’s safe-haven status. This, in turn, assisted the USD/JPY pair to find some support ahead of the 104.00 round-figure mark, at least for the time being.

Market participants now look forward to the US economic docket, featuring the release of Core PCE Price Index, Personal Income/Spending data, Chicago PMI and Revised Michigan Consumer Sentiment. The data might influence the USD price dynamics, which along with the broader risk sentiment might produce some short-term trading opportunities.

Technical levels to watch