- USD / JPY remains under some selling pressure on Thursday and retreats further from annual highs.
- COVID-19 concerns and risk-off sentiment benefits the safe-haven JPY and contributes to the pair’s selling bias.
- The Fed’s optimistic expectations act as a tailwind for the USD and could help limit any further losses.
The pair USD/JPY has seen some sales at the start of the European session on Thursday and has fallen to fresh two-and-a-half week lows around the 110.20 region.
After the directionless price movements of the previous day, the USD / JPY pair has found new sales on Thursday and has extended its recent pullback from annual highs, around the 111.65 region touched last week. The concerns about the economic consequences of the spread of the delta variant highly contagious coronavirus have continued to weigh on investor sentiment. This has been evident by a weaker tone around the stock markets, which has continued to benefit the safe haven Japanese yen and it has put some pressure on the USD / JPY pair.
The bears have further taken the cues from the recent sharp drop in U.S. Treasury yields, which, for now, has limited any strong gains for the dollar American. That said, signs that the Fed is moving toward reducing its asset purchases ahead of schedule should act as a tailwind for the USD. Minutes from the June FOMC meeting revealed that policy makers agreed that they should be ready to act if inflation or other risks materialize, suggesting that QE reduction discussions could begin in the coming months.
This, in turn, should help limit any deeper losses for the USD / JPY pair and warrant some caution for aggressive bears. Therefore, it will be prudent to wait for a sustained break below the key psychological level of 110.00 before positioning for any further bearish movements. Market participants are now awaiting the release of data from initial weekly US jobless claims This, along with broader market risk sentiment, US bond yields and dollar price dynamics should generate some significant business opportunities.
USD / JPY technical levels
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