- USD / JPY extends the previous day’s pullback from six-day highs amid sustained USD sell bias.
- The latest optimism about additional US fiscal stimulus measures weighs on the USD.
- Optimistic market sentiment could weigh on the safe-haven JPY and help limit the slide.
The selling tone around the US dollar is dragging USD / JPY to new weekly lows, just below the 105.20 region, at the start of the European session on Wednesday. At the time of writing, the pair remains near its daily lows at 105.15.
After an initial rally to the 105.52 level, the pair has encountered new selling and has extended the previous day’s retracement drop from the six-day highs, around the region of 105.75. The retrocess it is due exclusively to the predominant selling bias around the US dollar and it seems unaffected by market optimism, which tends to weigh on the safe-haven Japanese yen.
The dollar has come under pressure for the last optimism about a fiscal stimulus package in the United States. US President Donald Trump raised hopes for a breakthrough in the stimulus package and said he was willing to accept a larger aid bill despite opposition from his own Republican Party. The comments raised prospects for more government loans and prompted a sell-off in US bonds.
Lack of demand for public debt pushed the US dollar DXY index to one-month lows, which in turn has been seen as one of the key factors putting pressure on the USD / JPY pair.
Meanwhile, renewed hopes for additional stimulus in the US have boosted investor sentiment and continued to drive cash flows to assets with perceived riskier stocks, such as stocks. However, risk appetite sentiment has done little to support USD / JPY, although it could become the only factor that could help limit deeper losses, At least for the moment.
There is no major economic data release on Wednesday. Therefore, developments around the US stimulus will continue to play a key role in influencing USD price dynamics. This, along with the broader risk sentiment in the market, will help investors seize some short-term opportunities.
Credits: Forex Street
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