USD/JPY steadies near mid-110s as USD sell-off takes a break
- USD/JPY extends losses on Monday.
- DXY starts retracing losses, remains in the red.
- US banks are closed in observance of Martin Luther King Day.
After closing the previous week with a 200-pip loss, the USD/JPY started the new week on a weak note and broke below the 111 mark to refresh its lowest level since early November at 110.52. As of writing, the pair was trading at 110.65, still down 40-pips, or 0.38%, on the day.
The unabated selling pressure seen on the USD remained as the primary driver of the pair's price action on Monday. After easing to a new multi-year low near the critical 90 mark earlier today, the US Dollar Index recovered a small part of its losses with the trading volume thinning out ahead of the NA session, at which American markets will be closed in observance of Martin Luther King Day. At the moment, the DXY is down 0.35% at 90.30.
The mixed market sentiment on Monday makes it difficult for the JPY to find demand as a safe-haven. Although Nikkei closed the day 0.26% higher, major equity indices in Europe struggle to keep a positive mood with the UK FTSE 100 and the German DAX indexes losing 0.1% and 0.33% respectively.
The remainder of the day is unlikely to provide any catalysts that could cause sharp fluctuations.
Technical outlook
Valeria Bednarik, American Chief Analyst at FXStreet, writes, "according to the 4 hours chart, the risk is skewed toward the downside despite the limited momentum, as the 100 SMA is crossing below the 200 SMA, both around 112.60, while the RSI indicator maintains its bearish slope around 30. A downward acceleration through 110.50 should see the pair getting closer to the 110.00 figure, with the next relevant support being the 109.80 price zone, where the pair has multiple daily highs and lows from August/September last year."