USD / JPY experiences session lows, around the 104.70 region

• The USD / JPY did not capitalize on its Asian session higher until the zone of the 105.00.
• The prevailing cautious mood benefited the JPY safe haven and sparked some selling.
• Uncertainty about additional US stimulus measures kept the dollar on the defensive.

The pair USD/JPY remained depressed near the lower end of its trading range in the Asian session and was observed to oscillate in a range around the region of 104.70.

The pair tried to take advantage of the positive movement of the previous day and gained some ground during the first part of the session on Friday. The Japanese yen weakened slightly after data released in Japan showed the economy facing deflationary pressure induced by the coronavirus. In fact, Japan’s consumer price index fell for the second month in a row in September, declining by 0.3% annual compared to the decline in 0.4% of the previous month.

Also, the flash version of the Japanese manufacturing PMI it failed to meet market expectations and remained in contraction territory. Negative factors, to a greater extent, were offset by underlying caution in markets and the uncertain political environment in the U.S. This, in turn, extended some support to the Japanese yen’s safe-haven status and maintained a cap on any strong USD / JPY gains, instead prompted some selling at higher levels.

On the other hand, the expectations of a pre-election stimulus package in the U.S. vanished, preventing the U.S. dollar from being aggressive and contributing to the pair USD/JPY back a few 25-30 pips. Despite the positive developments in the next round of US fiscal stimulus measures, investors did not appear to be convinced that the bill could actually pass through the Senate amid strong opposition from Republicans to this bill of great encouragement.

It is worth remembering that the Speaker of the House of Representatives, Nancy Pelosi, He said Thursday that stimulus talks were on the right track and would soon be ready to put the stimulus bill in writing. Pelosi further added that the aid bill could be passed in the chamber before Election Day.

Now it will be interesting to see if the pair USD/JPY it is capable of attracting a new purchase or if the last downward stage points to the appearance of a new sale, paving the way for an extension of this week’s strong drop.

Technical Levels