USD/JPY struggles near multi-week lows, just below 103.00 mark

The USD/JPY pair languished near the lower end of its daily trading range, with bears awaiting some follow-through selling below the 103.00 mark.

The pair failed to capitalize on its Asian session uptick, instead met with some fresh supply near the 103.30 region and dropped to near three-week lows on the first trading day of 2021. The intraday pullback of around 30-35 pips was exclusively sponsored by the prevalent bearish sentiment surrounding the US dollar.

The likelihood of additional US financial aid package and expectations that the Fed will keep interest rates lower for a longer period kept the USD depressed through the first half of the trading action on Monday. However, a combination of factors weighed on the Japanese yen and extended some support to the USD/JPY pair.

Investors have been betting on a strong global economic recovery in 2021. This, along with the mass distribution of vaccines, helped offset worries about the new faster-spreading coronavirus strain and remained supportive of the risk-on environment. This was seen as a key factor undermining the safe-haven JPY.

Adding to this, a possible tightening COVID-19 restrictions in Tokyo further held traders from placing any aggressive bets and helped limit deeper losses for the USD/JPY pair, at least for now. That said, the near-term bias remains tilted in favour of bearish traders and supports prospects for further weakness.

Moving ahead, market participants now look forward to the release of final US Manufacturing PMI print for a fresh impetus. Traders might further take cues from the USD price dynamics and developments surrounding the coronavirus saga, which might continue to play a dominant role in influencing the broader risk sentiment.

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