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  • USD/JPY retreats from 104.20 to session lows at 103.75.
  • Dollar strength wanes on lower US Treasury yields.
  • USD/JPY: A drop to 103.18 is not favoured so far – UOB.

The USD/JPY has erased previous gains, after failing to break above 104.20 earlier today. The pair has pulled back to 103.75 during the late US trading session turning negative on the day.

The USD loses steam as US T-Bond yields drop

The dollar has been unable to hold gains on Thursday after having opened the day on a strong note. The 2% decline on the yield of the benchmark 10-year Treasury note has pulled the dollar lower across the board. 

The US Dollar Index appreciated on early trading, buoyed by the risk-averse sentiment as downbeat news about the persistent increase on COVID-19 infections and deaths offset optimism triggered by the progress on some vaccine projects.

On the macroeconomic domain, the US Weekly Jobless Claims disappointed with a larger than expected increase on the week of November 13 while home sales and the Philadelphia Fed’s manufacturing index have reported better than expected readings. The impact of these figures on the US dollar, however, has been minimal.

USD/JPY: A drop to 103.18 is not favoured so far – UOB

The USD/JPY is reaching closer to multi-month lows at 103.18, according to the FX Analysis team at UOB, however, that level is unlikely to be revisited: “We expected USD to weaken yesterday but held the view that ‘a sustained decline below the solid support at 103.75 is unlikely’. USD subsequently dropped to a low of 103.63 before rebounding. Downward momentum is beginning to wane and the odds for further USD weakness are low. That said, it is too early to expect a sustained recovery. USD is more likely to consolidate and trade sideways, expected to be within a 103.70/104.20 range.”

Technical levels to watch