USD / JPY hovers near 107.00, backs off due to USD sell-off

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  • USD / JPY fell from multi-month highs at 106.90 in the recent trade.
  • The pair is likely to remain subdued ahead of key US events later in the week.

The USD/JPY It has retreated from session and multi-month highs at 106.90 in recent trading amid a broad weakening of the US dollar that has caused the US Dollar Index (DXY) to dip below the 91.00 level again. That means the JPY is now flat on the day against the USD, while the DXY is now down around 0.2% amid the strength of the EUR / USD (which recently rebounded above 1.2050 and hit 1.2070) and in GBP / USD. (which has recovered to 1.3950 from the lows hit in the Asian session below 1.3880).

No fundamental catalyst was behind the rally in USD weakness that pushed USD / JPY back from the highs, instead traders are citing weakness heading into the 4:00 pm London correction. Technical resistances are also mentioned; When it rose to 106.90, USD / JPY reached the top of a long-term uptrend that has been limiting price action since the beginning of 2021. Note also that resistance in the form of the highs of August 2020 also resides around 107.00, probably contributing to the uptick in selling pressure.

Technically speaking, while USD / JPY maintains the bullish bias that has been intact for most of the year thus far, the pair may struggle in the short term and some bulls may expect a pullback to support 106.20 (Mid-range highs). February) before adding to lengths.

Performance of the day

It has been a quiet session for the USD and JPY for the most part, amid a lack of fundamental catalysts in the form of US data or updates that change sentiment regarding the pandemic or US fiscal stimulus. News that Tokyo is likely to request an extension of its state of emergency (after six other prefectures ended theirs over the weekend) does not appear to have affected JPY sentiment much. Neither was the disappointing data from the Japanese company; In the fourth quarter of 2020, the company’s earnings were down 4.7% year-over-year, the company’s sales were down 4.5% year-over-year, and business capital spending was down 4.8% year-over-year.

Regarding the USD / JPY; If the US data is stronger than expected, this could trigger a further rise in US bond yields, putting further upward pressure on US rates. Over Japan, it could act as an additional tailwind for USD / JPY. Conversely, any combination of poor data and / or a moderate enough tone from Fed Chairman Jerome Powell could be enough to trigger a further pullback in U.S. bond yields, which would have the opposite impact on the USD / JPY.

Technical Levels

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