- USD/JPY came under some renewed selling pressure and eroded a major part of the overnight gains.
- A softer tone surrounding the USD was seen as a key factor exerting downward pressure on the pair.
- An uptick in the US bond yields, the underlying bullish sentiment helped limit losses for the major.
The USD/JPY pair edged lower through the Asian session and was last seen hovering near the lower end of its daily trading range, around the 103.75-70 region.
The pair witnessed some fresh selling on Wednesday and extended the previous session’s intraday pullback from levels beyond the 104.00 round-figure mark. The downtick was sponsored by a softer tone surrounding the US dollar, though seems limited amid the underlying bullish sentiment in the global financial markets.
The greenback remained depressed as investors turned cautious ahead of President-elect Joe Biden’s inaugural ceremony on Wednesday. That said, hopes for more aggressive US fiscal spending under Biden’s presidency continued lending support to the US Treasury bond yields, which should help limit any meaningful USD downside.
The market bets for additional US stimulus measures increased further after the US Treasury Secretary nominee Janet Yellen’s confirmation hearing before the Senate Finance Committee on Tuesday. Yellen urged lawmakers to act big on COVID-19 relief package and not worry too much about debt, though did little to influence the market sentiment.
Apart from this, the optimism over the rollout of vaccines for the highly contagious coronavirus disease continued boosting investors’ confidence. This, in turn, could weigh on the safe-haven Japanese yen and holds bearish traders from placing any aggressive bets around the USD/JPY pair amid absent relevant economic releases.
The market focus now shifts to the latest monetary policy update by the Bank of Japan, scheduled to be announced during the Asian session on Thursday. Some repositioning trade ahead of the key event risk might infuse some volatility around the USD/JPY pair and assist traders to grab some meaningful opportunities.
Technical levels to watch