- USD / JPY is moving lower at the start of the European session amid weaker tone around the USD.
- Pessimistic expectations from the Fed continue to put some downward pressure on the dollar.
- Optimism over the COVID-19 vaccine weighs on the safe haven JPY and could limit the slide.
The pair USD/JPY remains under pressure at the start of the European session on Thursday and falls to new daily lows around the 104.25 / 30 region. The pair has encountered some resistance just above the 104.50 region and is moving lower amid a weak US dollar.
The pair has witnessed a modest pullback from the 104.65 region, at one-week highs reached during the Asian session, and has returned a portion of the previous day’s strong positive move of nearly 100 pips. The drop is solely due to a softer tone around the US dollar, although prevailing optimistic sentiment in the market could help limit deeper losses in the USD / JPY pair.
As investors look beyond the optimistic US PMI figures for November on Monday, speculation that the Fed could ease monetary policy in December has put further downward pressure on the dollar. Aside from this, concerns about the economic consequences of the continued rise in new coronavirus cases have further contributed to the weaker tone around the USD.
Meanwhile, the latest optimism about a possible early launch of vaccines for COVID-19 has continued to support risk sentiment. Global risk appetite has been bolstered by news that US President-elect Joe Biden has received the go-ahead to begin his transition to the White House. This, in turn, has weighed on the safe-haven Japanese yen and could offer some support to the USD / JPY pair.
Investors may also be reluctant to open aggressive positions ahead of Wednesday’s release of the minutes of the FOMC meeting, which will be scrutinized for the possibility of the Fed easing its monetary policy at the December meeting. Therefore, it will be prudent to wait for a strong continuation sell before positioning for the resumption of the pair’s recent bearish move.
USD / JPY technical levels
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