USD/JPY: The risk is still skewed to the downside in the near-term

The USD/JPY pair trades around 103.90, consolidating weekly losses. The bullish potential is well-limited as dollar/yen is comfortable trading sub-104.00, Valeria Bednarik, Chief Analyst at FXStreet, reports.

Key quotes

“The dollar is getting some attention early in the European session as concerns mount and fears rule. Global stocks are down as investors can’t cheer vaccine news. The second wave of the pandemic continues to worsen in the northern hemisphere, and more restrictions are being planned or announced in the US and Europe. Speculative interest is pricing in a steeper economic downturn in Q4.”

“The 4-hour chart shows that the USD/JPY pair is developing well below all of its moving averages, with the 20 SMA still heading south below the larger ones. Technical indicators are modestly recovering but holding near weekly lows and lacking directional momentum.” 

“The risk of a bearish extension could decrease on a recovery above 104.00, but the USD/JPY pair will remain far from bullish.”