USD / JPY near four-day lows around 110.75 region

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  • A combination of factors puts some pressure on USD / JPY for the third day in a row.
  • The diminishing odds of an earlier Fed rate hike continues to act as a headwind for the USD.
  • Nervousness around Covid-19 benefits safe-haven JPY and contributes to intraday selling bias.

The pair USD / JPY has fallen to four-day lows, around the 110.75 region, during the first half of the European session although it has lacked continuation sales.

After the directionless price movements of the previous day, the USD / JPY pair found new selling on Tuesday, pressured by a combination of factors. The US dollar has extended its retracement decline post-NFP and has remained under pressure amid lower odds of a tightening of past monetary policies by the Fed.

An unexpected rise in the unemployment rate in the United States eclipsed a large pace from the core NFP and suggested that the Fed will wait before reducing its asset purchases. This has acted as a headwind for the USD and has dragged the USD / JPY lower for the third day in a row on Tuesday.

In the meantime, concerns about the spread of the Delta variant The highly contagious coronavirus has weighed on investor sentiment. This has been evident by a cautious mood around the stock markets, which supports the safe-haven Japanese yen and has put additional pressure on the USD / JPY pair.

The bears have taken more indications of a further decline in US Treasury yields, which has been seen as another factor weighing on the USD. However, the decline remains limited as investors appear reluctant to open aggressive positions ahead of the release of FOMC minutes on Wednesday.

Since the Fed advanced its calendar for the first post-pandemic interest rate hike, it will now seek new clues on the central bank’s monetary policy outlook. This will influence the USD and could provide further directional momentum to the USD / JPY pair.

Meanwhile, the release of the US ISM services PMI on Tuesday, coupled with broader market risk sentiment, could generate some short-term trading opportunities around the USD / JPY pair.

USD / JPY technical levels

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