USD/JPY bounces off multi-week lows, still in the red around 104.30 region

The USD/JPY pair remained depressed through the early North American session, albeit has managed to rebound around 20-25 pips from five-week lows touched earlier this Wednesday.

The pair extended this week's retracement slide from levels just above the key 105.00 psychological mark and witnessed some heavy selling for the second consecutive session. A selloff in the global equity markets forced investors to take refuge in traditional safe-haven assets. This, in turn, boosted the Japanese yen and was seen as a key factor exerting pressure on the USD/JPY pair.

The global risk sentiment took a hit on the back of growing worries about the continuous surge in new coronavirus cases. The US political uncertainty and the lack of progress in the US stimulus talks further dampened the market mood. The global flight to safety was further reinforced by a fresh leg down in the US Treasury bond yields, which contributed to the USD/JPY pair's intraday fall.

However, concerns that renewed lockdown measures to curb the second wave of COVID-19 infections could derail the already fragile economic recovery provided a strong to the US dollar's status as the global reserve currency. A broad-based USD strength helped ease the bearish pressure, rather assisted the USD/JPY pair to find decent support ahead of the 104.00 mark, or September monthly swing lows.

That said, any meaningful recovery still seems elusive amid absent relevant market-moving economic releases. The focus now shifts to the latest monetary policy update by the Bank of Japan (BoJ), scheduled to be announced during the Asian session on Thursday. The BoJ decision, along with developments surrounding the coronavirus saga will now play a key role in influencing the near-term momentum for the USD/JPY pair.

Technical levels to watch