USD / JPY falls to 105.00, near two-week lows

• USD / JPY fell to two-week lows amid the emergence of new USD selling.
• Moderation in safe haven demand undermined the JPY and helped limit deeper losses.
• A sustained break below 105.00 will pave the way for additional weakness.

The USD sell bias accelerated during the early North American session and pushed the pair USD/JPY to nearly two-week lows, around the 105.15 region in the past hour.

The US dollar remained depressed due to the fading of hopes about additional US fiscal stimulus measures and US political uncertainty ahead of the upcoming US presidential election on November 3. and put some additional downward pressure on the USD / JPY pair.

However, a positive opening in US equity markets affected demand for traditional safe-haven assets, including the Japanese yen. Market optimism, in turn, was seen as the only factors that helped limit deeper losses for the USD / JPY pair, at least for now. This makes it prudent to wait for some subsequent selling before placing aggressive bear bets.

On the economic data front, the Producer Price Index (PPI) in the US rose to 0.4% month-on-month in September from 0.3% in the previous month. On an annual basis, the PPI increased to 0.4% from -0.2% and exceeded the market expectation of 0.2%. The data, however, did little to impress bullish traders or provide a significant boost to the USD / JPY pair.

Meanwhile, Richmond Federal Reserve Chairman Thomas Barkin reiterated that the US Federal Reserve will aim to keep rates low until they see moderate rebounds in inflation. Separately, Federal Reserve Vice Chairman Richard Clarida said the Federal Reserve is committed to using its full range of tools to support the economic recovery and that it might take another year before US GDP reaches its pre-pandemic peak. .

Now it will be interesting to see if the USD / JPY pair can find any support at lower levels or break the key psychological mark of 105.00. Some follow-up weakness below the monthly swing lows, around the 104.94 level, will be seen as a new trigger for bearish traders and will pave the way for a decline towards the challenge of the 104.00 level.