USD / JPY recovers from multi-week lows, lacks follow-up amid weakened risk sentiment

• USD / JPY managed to find some support near 104.00 amid widespread USD strength.
• The US dollar held firm after data showed the US economy grew 33.1% between July and September.
• A new leg to the downside in equity markets sustained the safe-haven JPY and limited gains.

The USD / JPY pair managed to bounce around 45 pips from multi-week lows and was last seen trading in positive territory, around the 104.40 / 45 level, where it is up 0.12% on the day.

The pair stopped its intraday decline and witnessed some short intraday hedging move from near the September monthly swing low support around 104.00. The US dollar added to its recent strong gains amid growing concerns about the possible economic impact of the new restrictions to curb the second wave of COVID-19 infections.

The already strong dollar received an additional boost from the stronger-than-expected US GDP report, which showed the world’s largest economy expanding at an annualized rate of 33.1% during the third quarter of 2020. The upbeat data helped offset uncertainty about the actual outcome of the US presidential election next week.

The intraday rally, meanwhile, lacked strong bullish conviction amid a further downside in equity markets, which tends to benefit the relative safe-haven status of the Japanese yen. This makes it prudent to wait for some solid follow-up buying before confirming that the USD / JPY could have bottomed out in the near term.

Conversely, a convincing advance above 104.00 will be seen as a new trigger for bearish traders and will set the stage for a further short-term depreciation move. The USD / JPY pair could become vulnerable to accelerate the slide towards intermediate support 103.40-35 en route to the next major support near 103.00.