- The USD’s sustained sell bias is not helping the USD / JPY retain its modest initial gains.
- Risk appetite sentiment weighs on the safe-haven Japanese yen and helps limit the pair’s losses.
- The technical setup favors the bears and supports the prospects for further short-term losses.
The pair USD/JPY it is extending the decline near the 102.75 level during Monday’s European session.
The pair has failed to capitalize on its rally from the Asian session and has encountered new sales near the 103.30 region, falling to nearly three-week lows on the first trading day of 2021. The intraday retracement of around 50 pips is due exclusively to the prevailing bearish sentiment around the US dollar.
The probability of a Additional US financial aid package and expectations that the Fed will keep interest rates lower for a longer period it keeps the dollar under pressure during the first half of trading action on Monday. However, a combination of factors has weighed on the Japanese yen and offered some support to the USD / JPY pair.
Investors have opted for a strong global economic recovery in 2021. This, along with the mass distribution of vaccines, has helped offset concerns about the newest strain of coronavirus spreading more rapidly and continues to support risk appetite among investors. This has been seen as a key factor weighing on safe haven JPY.
Also, a possible Tightening of restrictions due to COVID-19 in Tokyo It has prevented investors from opening aggressive positions and has helped limit deeper losses for the USD / JPY pair, at least for now. That said, the short-term bias remains skewed in favor of the bears and supports the prospects for further weakness.
Market participants now await the release of the final US Manufacturing PMI index for further momentum. Investors could follow the signs of USD price dynamics and developments around the coronavirus saga, which could continue to play a dominant role by influencing broader risk sentiment.
USD / JPY technical levels
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