- USD/JPY witnessed heavy selling on Wednesday and snapped two days of the winning streak.
- A softer risk tone benefitted the safe-haven JPY and exerted pressure amid sliding US bond yields.
- A modest USD strength helped limit any deeper losses ahead of the US Durable Goods Ordes.
The USD/JPY pair dropped to the 113.55-50 area, back closer to weekly lows during the mid-European session, albeit quickly recovered a few pips thereafter. The pair was last seen trading around the 113.75 region, still down nearly 0.35% for the day.
The pair came under some renewed selling pressure on Wednesday and eroded a major part of its weekly gains recorded over the past two trading sessions. The intraday downfall picked up pace amid a modest intraday decline in the equity markets, which drove some haven flows towards the Japanese yen.
Meanwhile, the risk-off impulse led to a further decline in the US Treasury bond yields, which was seen as another factor that added to the selling bias surrounding the USD/JPY pair. That said, a modest pickup in the US dollar demand held limit any deeper losses, at least for the time being.
The greenback drew some support from growing market acceptance that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Apart from this, Tuesday's upbeat US macro data further extended support to the buck, though bulls lacked conviction.
Market participants now look forward to the US economic docket, highlighting the release of Durable Goods Orders. Apart from this, the US bond yields will influence the USD price dynamics, which, along with the broader market risk sentiment, should provide some impetus to the USD/JPY pair.
Beyond this, traders will focus on the Bank of Japan policy meeting and the Advance US Q3 GDP report on Thursday. This, along with the release of the US Core PCE Price Index on Friday would drive the USD/JPY pair heading into next week's FOMC meeting. The latter could act as a key trigger and help determine the near-term trajectory.
Technical levels to watch
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