The USD/JPY failed to stop its previous session bearish moves and witnessed some further selling moves around 105.15 level, mainly due to the broad-based U.S. dollar weakness. That was triggered by the second wave of COVID-19 cases in the United States, which fueled concerns about the U.S. economic recovery and further undermined the already weaker sentiment surrounding the U.S. dollar.
On the other hand. The risk-on market sentiment (supported by the optimism about the coronavirus vaccine undermined the safe-haven Japanese yen, which become the key factor that helped the USD/JPY currency pair to limits its deeper losses. The USD/JPY is trading at 105.27 and consolidating in the range between 105.11 - 105.61.
The fears that the second wave of COVID-19 cases could weaken the U.S. economic recovery still hover all over the market, keeping the U.S. dollar buyers on the defensive. Apart from virus woes, the long-lasting deadlock over the following round of the U.S. fiscal stimulus also exercised downside influence on the U.S. dollar and contributed to the currency pair losses. The U.S. Congress initially reaching a consensus over the latest stimulus measures but still have considerable differences in the size of the stimulus. This, in turn, the broad-based U.S. dollar lost its early-day gains.
At the US-China front, the increased tensions between the United States and China continued to pace after the U.S. President Donald Trump clearly said that he didn't want to speak with the Dragon nation. This happened after the suspension of the trade review meeting. Whereas the U.S. President Donald Trump kept increasing the difficulties for China's companies by imposing multiple measures for Huawei company, these lingering Sino-US tensions could cap further upside in the equity market.
Despite this, the market trading sentiment rather unaffected by these types of gloomy headlines and gaining positive traction from the optimism over a potential vaccine for the highly infectious coronavirus, which undermined the safe-haven Japanese yen, which become the key factor that capped further downside for the pair.
Daily Support and Resistance
S1 104.84
S2 105.52
S3 105.78
Pivot Point 106.2
R1 106.46
R2 106.88
R3 107.56
The USD/JPY is trading with a bearish bias below 105.389 level, and the recent bearish candles are signaling selling bias in the pair. On the lower side, the USD/JPY may gain support at 104.258 level, along with resistance at 106.376 level. The 50 periods EMA is also suggestings chances of selling in the pair. It would be best if we wait a bit for a bearish breakout of 105 level before entering a sell trade in the USD/JPY pair today. Good luck!