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USD/JPY: Downside move gathers pace, focus on Thursday's close

  • US stock futures drop, pushing USD/JPY to session lows below 110.50. 
  • Wednesday's inside day candle has made Thursday's close pivotal. 

The anti-risk Japanese yen is prolonging its bullish move seen in early Asia amid losses in the US stock futures.

The USD/JPY pair fell to a session low of 110.45 a few minutes before press time and is currently trading near 110.60, representing a 0.5 % drop on the day.

The spot violated the psychological support of 111.00 during early Asian trading hours after risk sentiment soured in response to news reports that the US Senate was grappling with last-minute hurdles and struggling to pass the $2 trillion coronavirus stimulus bill on Wednesday evening.

However, fresh reports released an hour ago said the Senate is on track to vote on the bull. Even so, the risk-off sentiment strengthened, pushing the futures tied to the S&P 500 futures lower. At press time, the index futures are reporting a 1% decline.

Selling in both stocks and USD/JPY will likely gather pace if the Senate fails to approve the bill, which has already been delayed by four days. It's worth noting that the coronavirus outbreak in the US and across Europe is showing no signs of slowing down. While the Federal Reserve's unlimited bond purchase program has bought time, progress on the fiscal front is needed soon.

Today's close pivotal

USD/JPY witnessed two-way business on Wednesday but traded well within Tuesday's high and low. The resulting inside day Doji candle implies consolidation in the narrowing price range.

As a result, the next move depends on the direction in which the range is breached. A close above Wednesday's high of 111.68 would confirm a bullish breakout, while a close under 110.75 (Tuesday's low) would imply a range breakdown.

Technical levels

 

 

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