USD / JPY falls below 105.50, cuts daily gains

• USD / JPY rejected at the 105.75 zone, retraced below 105.00.
• The dollar remains on the defensive with all eyes on the stimulus negotiations.
• USD / JPY is expected to hold between 105 and 106.00 for some time.

The US dollar’s attempted rally during the European trading session on Tuesday lost steam at 105.75, before retreating during the US session and returning below 105.50. The pair has now barely changed on the daily charts.

Uncertainty from US stimulus weighs on dollar

The USD extended its uptrend from last week’s lows near 105.00 today, despite the weak tone of the USD index, and managed to hit new 7-day highs at 107.75. Positive market sentiment appears to have put pressure on the safe haven Japanese yen rather than the US dollar.

The dollar, however, was unable to maintain its positive tone amid uncertainty over the coronavirus stimulus negotiations in the United States. Representative of the US House of Representatives, Nancy Pelosi, set a deadline for Tuesday, reducing the chances of reaching an agreement before Election Day.

USD / JPY is expected to remain between 105.00 and 106.00 for some time – UOB

From a technical standpoint, the UOB currency analysis team expects USD / JPY to keep moving between 105.00 and 106.00 for the next few weeks: “Last Thursday (Oct 15 at 105.20), we see that the USD ‘has to close below 104.70 before a sustained decline can be expected’. Subsequently, the USD traded calmly and the slight downward pressure has eased. The momentum indicators are mostly neutral and the USD could trade between 105.00 and 106.00 for now. ”