USD / JPY dips below 104.00 amid USD decline

• USD / JPY fell below the 104.00 level on Thursday amid a broad continuation of USD weakness.
• The pair now broke a medium-term uptrend, which could open the door to a test of the November lows.

The USD/JPY it has dipped below 104.00 in recent trading, setting lows at 103.68 before falling back to current levels around 103.80. On the day, the pair was down about 0.6% or 60 pips ..

No end in sight for the US dollar’s broad slide yet

The USD has yet to see anything close to a respite, with the Dollar Index (DXY) underway for its third day of losses. Losses have been steep on Thursday, with the DXY falling to lows around 90.50 since the day’s open above 91.00; no specific catalyst appeared to be directly responsible for the USD earlier in the day (just a continuation of fiscal stimulus and vaccine optimism?), although a recent batch of robust data from the November US services PMI appears to have caused more losses;

Markit released its final services PMI reading for November, which was revised up to 58.4 from the preliminary estimate of 57.7, the highest reading in more than five years. Soon after, the Institute of Supply Management released its November services PMI estimate, which came in at a solid 55.9, modestly disappointing expectations of 56.0. Importantly, the employment sub-index remained above 50, which implies that employment in the service sector was expanding in the month that just ended despite the worsening of the virus situation.

Going into the data, some had argued that the strong numbers could be bullish for the USD, as they could discourage the Fed from offering more accommodations at the FOMC meeting later this month. However, what we ended up seeing was more of a risk in the reaction to the data, where stocks and risk-sensitive currencies rallied while the USD fell.

USD / JPY breaks below medium-term uptrend

USD / JPY has broken below a medium-term uptrend linking the lows of November 6, 23 and 30 that came into play (and failed) as resistance just above the psychological level of 104.00. The combination of these resistance factors was not enough to prevent bearish sentiment in the USD from pushing the pair lower. Meanwhile, USD / JPY appears to have found resistance just above the November 18 low at 103.66. If this level rises, a test of the November low at 103.19 is likely.