USD/JPY slides to weekly lows, around 105.20 region amid notable USD supply

The offered tone surrounding the greenback dragged the USD/JPY pair to fresh weekly lows, around the 105.20 region during the early European session.

Following an early uptick to the 105.52 level, the pair met with some fresh supply and extended the overnight retracement slide from six-day tops, around the 105.75 region. The pullback was exclusively sponsored by the prevalent US dollar selling bias and seemed rather unaffected by the upbeat market mood, which tends to undermine the safe-haven Japanese yen.

The greenback was pressured by the latest optimism about a pre-election US stimulus package. The US President Donald Trump raised hopes for a stimulus breakthrough and said that he was willing to accept a larger aid bill despite opposition from his own Republican Party. The comments raised prospects for more government borrowing and sparked a selloff on the US bonds.

The lack of demand for government debt pressed the key USD Index to one-month lows, which, in turn, was seen as one of the key factors exerting pressure on the USD/JPY pair.

Meanwhile, renewed hopes for additional US stimulus boosted investors' confidence and continued driving flows into perceived riskier assets, including equities. The risk-on environment, however, did little to lend any support to the USD/JPY pair, albeit might turn out to be the only factor that might help limit any deeper losses, at least for the time being.

There isn't any major market-moving economic data due for release on Wednesday. Hence, developments surrounding the US stimulus will continue to play a key role in influencing the USD price dynamics. This, along with the broader market risk sentiment will assist traders to grab some short-term opportunities.

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