USD/JPY struggles near multi-week lows, just below 103.00 mark
|- Sustained USD selling bias failed to assist USD/JPY to preserve its early modest gains.
- The risk-on mood undermined the safe-haven JPY and helped limit losses for the pair.
- The set-up favour of bearish traders and support prospects for further near-term losses.
The USD/JPY pair languished near the lower end of its daily trading range, with bears awaiting some follow-through selling below the 103.00 mark.
The pair failed to capitalize on its Asian session uptick, instead met with some fresh supply near the 103.30 region and dropped to near three-week lows on the first trading day of 2021. The intraday pullback of around 30-35 pips was exclusively sponsored by the prevalent bearish sentiment surrounding the US dollar.
The likelihood of additional US financial aid package and expectations that the Fed will keep interest rates lower for a longer period kept the USD depressed through the first half of the trading action on Monday. However, a combination of factors weighed on the Japanese yen and extended some support to the USD/JPY pair.
Investors have been betting on a strong global economic recovery in 2021. This, along with the mass distribution of vaccines, helped offset worries about the new faster-spreading coronavirus strain and remained supportive of the risk-on environment. This was seen as a key factor undermining the safe-haven JPY.
Adding to this, a possible tightening COVID-19 restrictions in Tokyo further held traders from placing any aggressive bets and helped limit deeper losses for the USD/JPY pair, at least for now. That said, the near-term bias remains tilted in favour of bearish traders and supports prospects for further weakness.
Moving ahead, market participants now look forward to the release of final US Manufacturing PMI print for a fresh impetus. Traders might further take cues from the USD price dynamics and developments surrounding the coronavirus saga, which might continue to play a dominant role in influencing the broader risk sentiment.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.