- USD / JPY extends the heavy losses of the previous day and remains under pressure for the second day in a row.
- The prevailing sentiment of risk aversion benefits the JPY and puts some pressure on the pair.
- A modest pickup in USD demand could help limit the slide amid political uncertainty in the United States.
The pair USD/JPY has fallen around 35 pips from the highs of the Asian session and has fallen to one-month lows, around the 104.20 region, at the start of the European session. At time of writing, the pair is recovering slightly from daily lows, although it remains negative and with pressure intact around 104.30.
The pair has extended this week’s retracement slide, from just above the key psychological level of 105.00, and has witnessed a strong continuation selling for the second day in a row on Wednesday. The downward movement is due exclusively to the prevailing sentiment of risk aversion, which tends to benefit the demand for the Japanese yen as a safe haven.
The crescents Concerns about the possible economic impact of the increase in the number of coronavirus cases they have continued to weigh on investor sentiment. This, along with the lack of progress in the US fiscal stimulus plans, has further clouded market sentiment. This has been evidenced by weaker sentiment around equity markets, which has boosted prices. monetary flows to traditional safe-haven assets, such as the Japanese yen.
In the meantime, concerns that the new lockdown measures to curb the second wave of COVID-19 could prove detrimental to the already fragile global economic recovery have offered some support for the US dollar as a global reserve currency. This, in turn, could turn out to be the only factor that could limit any further decline for the USD / JPY pair.
Therefore, any subsequent decline is likely to attract some buying near the September monthly lows, around the round level of 104.00. That said, the uncertain political situation in the US could prevent USD bulls from opening aggressive potions and cap any significant rally for the USD / JPY pair amid the absence of relevant economic releases on Wednesday.
It’s worth remembering that polls have been indicating that Democratic candidate Joe Biden is ahead of incumbent President Donald Trump. However, investors are wary of predicting the actual outcome, as the gap is narrow in certain key states.
Credits: Forex Street