USD / JPY falls to new weekly lows around the 109.70 region

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  • A combination of factors dragged USD / JPY lower for the second day in a row.
  • Nervousness over COVID-19 benefits the safe haven JPY and puts some pressure on the pair.
  • The pullback in US bond yields keeps USD bulls on the defensive.

The pair USD/JPY has continued to lose ground during the first half of Thursday’s European session and has fallen to new weekly lows, around the 109.70 region in the last hour.

The pair has extended the heavy losses of the previous day and has witnessed some continuation sales for the second day in a row Thursday. Investors follow concerned about the spread of the Delta variant highly contagious from coronavirus. Apart of this, the softest figure for Chinese GDP it has further affected global risk sentiment, benefiting the safe-haven Japanese yen and putting some pressure on the USD / JPY pair.

The bears have taken even more indications of a Extension of the previous day’s decline in U.S. Treasury yields, which has kept the US dollar bulls on the defensive. Aside from this, the pessimistic testimony from Fed Chairman Jerome Powell on Wednesday has been seen as another factor that has acted as a headwind for the USD. During the semiannual congressional testimony, Powell reiterated that the rise in inflation was only temporary.

Powell’s comments overshadowed a report that showed that US producer prices posted their biggest annual increase in nearly 11 years. This follows Tuesday’s data that revealed US consumer inflation jumped to the highest level in more than 13 years in June. Incoming macroeconomic data point to rising inflationary pressures, although they have failed to convince investors that the Fed will tighten its monetary policy ahead of schedule.

Market participants are now awaiting the US economic calendar, with the release of initial weekly jobless claims and the Philadelphia Fed Manufacturing Index. This, along with US bond yields, will influence USD price dynamics later at the start of the American session. Aside from this, the broader market risk sentiment and Powell’s second day of testimony in Congress should provide further impetus to the USD / JPY pair.

USD / JPY technical levels

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