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USD / JPY bounces away from multi-week lows, still bearish around the 104.30 zone

The pair USD/JPY it remained depressed during the early North American session, although it has managed to bounce around 20-25 pips from the five-week lows touched earlier this Wednesday.

The pair extended this week’s retracement slide from just above the key psychological level 105.00 and witnessed some strong selling for the second session in a row. A sell-off in global equity markets forced investors to take refuge in traditional safe-haven assets. This, in turn, boosted the Japanese yen and was seen as a key factor putting pressure on the USD / JPY pair.

Global risk sentiment was affected by mounting concerns about the continued rise in new coronavirus cases. US political uncertainty and lack of progress in US stimulus talks further clouded market sentiment. The global flight to safety was bolstered by a further bearish leg in US Treasury yields, which contributed to the intraday decline in the USD / JPY pair.

However, concerns that renewed lockdown measures to curb the second wave of COVID-19 infections could derail the already fragile economic recovery provided strength to the status of the US dollar as a global reserve currency. A broad-based USD strength helped ease the downward pressure, rather it helped the USD / JPY find decent support before 104.00, or September’s monthly lows.

That said, any significant recovery still seems elusive amid the absence of relevant economic releases to move the market. The focus now shifts to the latest monetary policy update from the Bank of Japan (BoJ), scheduled to be announced during the Asian session on Thursday. The BoJ’s decision, along with developments surrounding the coronavirus saga, will now play a key role in influencing the short-term momentum of the USD / JPY pair.

Credits: Forex Street

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