USD/JPY falls to the 105.25 region

The USD/JPY once again witnessed a modest intraday pullback from the 105.50-55 resistance zone. Despite the slight recovery, it remained in the negative territory around 105.35. 

The pair still struggled to break out the resistance zone and has experienced some selling. It broke consecutive days of the winning streak. The drop is caused by a slight reduction in the US dollar. Slight improvement in global risk sentiment did not seem to affect it.

Hopes for the fiscal stimulus measures have supported profit-taking from USD

Renewed hopes that the US Congress could emerge from the months-long stalemate to agree to the next round of fiscal stimulus measures have helped ease market fears about the second wave of COVID-19 infections. This, in turn, has sparked some profit-taking from the USD from the two-month highs. It has also been seen as one of the critical factors that have put pressure on the USD/JPY pair.

A combination of factors could offer some support to the pair and help limit deeper losses. The news reported that the Democrats of the United States House of Representatives are developing a fiscal stimulus package for the coronavirus. It totals 2.2 trillion dollars. The news increased investor confidence and supported a positive rally in stock markets. The monetary flow of risk appetite could lower the Japanese yen’s safe-haven demand and hinder the USD/JPY pair’s deeper losses.

A rebound in US Treasury yields has reinforced the improvement in risk sentiment. It could recover USD demand and further help narrow the USD/JPY decline. 

Investors are now looking forward to US durable goods order data for a trade boost. It could affect the price dynamics of the US dollar and provide some short-term trading opportunities. Investors also consider the broader market risk sentiment to create momentum.