- USD / JPY remains under heavy selling pressure for the second day in a row on Wednesday.
- The troubles around COVID-19 benefit the safe-haven JPY and put pressure amid a renewed selloff around the USD.
- A convincing break below the support of a multi-week-old range favors the pair’s bears.
The USD / JPY pair has extended the drop after the US CPI of the previous day and has seen strong selling for the second day in a row on Wednesday. The downward movement has extended during the European session and has dragged the pair to almost a month’s lows, around the 109.25 region.
Concerns about the rapid spread of the Delta variant and a global economic slowdown have benefited the safe-haven Japanese yen. Apart from this, the appearance of some selling around the US dollar has put additional pressure on the USD / JPY pair. The pair’s bears have also taken cues for a modest decline in US Treasury yields.
The combination of factors has dragged the USD / JPY pair below the 109.60-50 support zone, marked by the lower end of a four-week-old trading range. This, coupled with the fact that the oscillators on the daily chart have just started to slide into negative territory, has set the stage for a further bearish move.
Therefore, a further decline towards the 109.00 round level, en route to August lows, around the 108.70 region, remains a clear possibility. Some continuation selling will be seen as a new trigger for the bears and will pave the way for a drop towards the next relevant support near the 108.35 region.
On the other hand, the breaking point of the trading range support, around the 109.50-60 region, now appears to act as immediate resistance. Any further recovery movement could attract new sales at higher levels and risks ending quickly. This should limit the recovery of the USD / JPY pair near the key psychological level of 110.00.
USD / JPY 4-hour chart
USD / JPY technical levels