- USD/JPY edged lower on Tuesday and snapped two consecutive days of the winning streak.
- COVID-19 jitters benefitted the safe-haven JPY and exerted downward pressure on the pair.
- A modest USD strength helped defend 100-hour SMA ahead of the US consumer inflation.
The USD/JPY pair witnessed some selling on Tuesday and stalled its two-day-old recovery move from near one-month lows, around mid-109.00s touched last week.
Worries about the economic fallout from the spread of the highly contagious Delta variant of the coronavirus extended some support to the safe-haven Japanese yen. Bearish traders further took cues from a modest downtick in the US Treasury bond yields, which was seen as another factor exerting some pressure on the USD/JPY pair.
On the other hand, the US dollar remained well supported by expectations that the Fed is moving towards tightening its monetary policy stance sooner than anticipated. This, in turn, helped limit any deeper losses for the USD/JPY pair. Investors also seemed reluctant to place any aggressive bets ahead of the US consumer inflation figures.
From a technical perspective, the USD/JPY pair, so far, has managed to hold its neck above 100-hour SMA. Any subsequent decline is likely to find decent near the key 110.00 psychological mark. Some follow-through selling below the 109.80 horizontal support will be seen as a fresh trigger for bearish traders and pave the way for additional losses.
Meanwhile, technical indicators on the 1-hour chart have been drifting lower in the bearish territory. That said, neutral oscillators on the 4-hour/daily charts haven't been supportive of a firm near-term direction and warrants some caution for positioning for an extension of the intraday downward trajectory.
On the flip side, the 110.30-40 congestion zone now seems to act as immediate resistance. This is closely followed by the 110.55-60 hurdle, above which a bout of short-covering has the potential to lift the USD/JPY pair back towards reclaiming the 111.00 round-figure mark.
USD/JPY 1-hour chart
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Technical levels to watch
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