USD / JPY falls and returns below 103.50 as US dollar gains decline

• USD / JPY has fallen back below 103.50 and down to Monday’s Asia Pacific session levels as USD strength wanes.
• The safe-haven JPY was one of the best in the G10 foreign exchange market on Monday amid risk mitigation flows.

He USD/JPY continues to retreat from highs initially touched above 103.80 as the strength of the US dollar wanes. The pair is currently trading just south of 103.50, with gains on the day now of just 0.1% or roughly 10 pips. In fact, the USD has seen most of its gains cut against most of its major G10 counterparts since the midpoint of the European morning, and the Dollar Index (DXY) fell from highs above 91.00 to levels. current at 90.20.

JPY Benefits of Safe Haven Properties

Aside from the USD, which remains Monday’s best performing currency within G10 FX, the JPY has held up very well. Monday has seen clear risk of bias in global market trading amid concerns regarding news coming out of the UK regarding a more virulent and recently discovered strain of Covid-19 that is spreading rapidly in the country and causing London and much of the South East to plunge back into full-scale blockade. Although much of the decline in global U.S. stocks has at least now slowed, in part as a result of the fact that a number of bank stocks have soured after passing Fed stress tests on them. will allow the restart of the share buyback, the JPY continues and the USD retreats from previous highs.

Japanese PMI draws USD / JPY line in the sand

Japanese Prime Minister Yoshihide Suga told the Japanese Finance Minister not to allow the USD / JPY to depreciate below 100, Nikkei reported during the Asia Pacific session on Monday. The report added that his comment came with an “unspoken message” that the Finance Minister should be prepared to sell JPY for USD if the pair breaks above this level. Apparently his comments have been confirmed by multiple sources.

So clearly, the Japanese Prime Minister is concerned about the effect that a further depreciation of the USD / JPY could have on Japan’s trade balance with the U.S. Also, this could be the Japanese Prime Minister’s way of inadvertently demonstrating that it does not is confident in the Bank of Japan’s ability to further weaken the JPY.

The comments had no immediate effect on USD / JPY, but keep in mind that if / when the pair starts to approach this level, the Japanese Ministry of Finance will be more likely to gape, as will manipulation. open market by the SNB.

USD / JPY gains are still capped by the 21 DMA

USD / JPY is still experiencing significant selling pressure ahead of its 21-day moving average (DMA). On Monday, the pair rose as high as the 103.89 level, just over 10 pips from the pair’s 21-DMA modestly above 104.00. The pair has struggled to maintain gains above its 21 DMA since mid-November and has consistently failed to rebound towards its 50 DMA, which is currently at 104.41. Meanwhile, the last time the pair was above its 200 DMA, which is currently at 106.31, was in June.

4 hour chart