USD/JPY continues to push lower below 110 as USD weakness persists

• USD sell-off gathers momentum on Wednesday.
• JPY finds extra demand on risk aversion.
• Markit Manufacturing/Services PMI from the U.S. are due next.

After losing nearly 80 pips on Tuesday, the USD/JPY pair extended its losses today with the broad-based USD sell-off remaining the main theme in the FX space on Wednesday. As of writing, the USD/JPY was trading at its lowest level in more than four months at 109.40, losing 0.85% on the day.

The US Dollar Index, which tested the 90 level more than a few times this week, fell sharply on Wednesday to renew its worst level since December 2014 at 89.27. Comments from the U.S. Treasury Secretary Steven Mnuchin increased the bearish pressure surrounding the greenback, which was already having a difficult time making a meaningful recovery. Speaking to reporters at the World Economic Forum in Davos, "obviously a weaker dollar is good for us as it relates to trade and opportunities," Mnuchin argued.

On the other hand, a negative sentiment surrounding major global equity indexes on Wednesday is helping the demand for traditional safe havens such as the JPY remain high. 

Later in the session, Markit is going to release the PMI figures for both the manufacturing and service sectors in the U.S. Although a positive reading  couldallow the buck to take a breather, a deep recovery is unlikely in the short-term if the DXY fails to retake the 90 handle.

Technical outlook

The pair could encounter the first technical support at 109 (psychological level) ahead of 108.50 (Sep. 5 low) and 108.30 (Sep. 8 low). On the upside, resistances align at 110.30 (daily high), 111.15 (Jan. 23 high) and 111.75 (200-DMA).