USD/JPY drops to fresh daily lows near 103.60

USD/JPY is falling for the second straight day on Friday.
Wall Street's main indexes look to open in the negative territory.
10-year US Treasury bond yield is down more than 2%.

Eren Sengezer FXStreet

The USD/JPY pair posted small daily losses on Thursday and continued to push lower on Friday with risk-off flows helping the JPY outperform its rivals. As of writing, the pair was trading at fresh daily lows, losing 0.14% at 103.64.

Eyes on US data, Wall Street

On Thursday, FOMC Chairman Jerome Powell's dovish remarks made it difficult for the greenback to find demand. Additionally, a sell-the-fact market reaction to Presiden-elect Joe Biden's $1.9 trillion coronavirus stimulus plan caused US Treasury bond yields to turn south and ramped up the bearish pressure on USD/JPY.

On Friday, the souring market mood, as reflected by a 0.4% drop in S&P 500 Futures and a 2.4% decline in the 10-year T-bond yield, is allowing the JPY to preserve its strength as a safe haven.

Meanwhile, the greenback is also taking advantage of the flight to safety with the US Dollar Index gaining 0.25% on the day at 90.45 and limiting USD/JPY's downside for the time being.

Later in the session, December Retail Sales and Industrial Production data from the US will be looked upon for fresh impetus. The University of Michigan will release its preliminary Consumer Sentiment Index report for January as well. More importantly, market participants will keep a close eye on the performance of Wall Street's main indexes. A sharp decline in the US stocks is likely to force USD/JPY to edge lower ahead of the weekend.

USD/JPY technical outlook

"The outlook is mixed and USD could trade between 103.00 and 104.40 for now," said UOB analysts. "Looking forward, the risk for a break of 104.40 first appears to be higher but USD could trade within the range for a while more.”

USD/JPY keeps the rangebound theme unchanged – UOB.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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