USD/JPY Drops Further Amid Broad US Dollar Weakness
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- The US continues to spiral downwards
- Hopes for US relief package
The USD/JPY pair continues its decline for a second consecutive day on Wednesday amid increased selling pressure for the US dollar. The pair is currently trading in its lowest intraday levels below 103.40. Which is in the neighborhood of a double bottom with the previous lowest closing price of 103.19 reached on Nov 9, the lowest level since the pandemic lows in March.
After the USD/JPY recovered from its major March sell-off, the pair has been gradually depreciating, forming a descending trading channel up to present levels. A few attempts by the bulls to create a buying momentum have been halted as the US dollar is in a solid bearish market for the large part of 2020.
The US Continues to Spiral Downwards
Today, as the European markets open, the dollar continues to slip against its competitors as market participants are favoring a risk-on mood, aided by hopes for an additional US fiscal stimulus and the upcoming FOMC policy decision scheduled later today.
Agreement on a Stimulus Bill Seems Closer in the US
On the US front, leaders of Congress inch closer to a compromise on a stimulus package to boost the US economy. That’s weighing on the weakening of the US dollar across the board as the market is hopeful that a deal can be reached before the festive break.
US lawmakers have been involved in intense negotiations this week as both Democrats and Republicans are now united towards the goal to provide a boost to the US economy in times when the coronavirus pandemic is sweeping across the continent.
Additionally, both sides are pressured to approve a bill before the holidays, as the leaders have signaled that they are working to agree on a package before the end of the year.
If the parties agree on a stimulus bill, the package could amount to a total of $748bn including unemployment insurances and funding for small businesses.
The negotiations include Democratic speaker and House of Representatives Nancy Pelosi, and Mitch McConnell, Republican Senate majority leader. Minority leaders in each chamber, Chuck Schumer and Kevin McCarthy are also involved in leading the negotiations. Leaders from both sides express upbeat projections that a final agreement could be reached as soon as possible.
Additionally, Fed Chairman Jerome Powell could once again call for the release of more financial support in his FOMC meeting today. Chair Powell has called multiple times for the injection of funding into the pandemic-ravaged economy since the first wave of the coronavirus.
The upcoming central bank meeting led by Mr. Powell will be closely monitored by traders and investors as it is expected to provide helpful guidance for the near-term state of the economy, growth forecast, and overall market sentiment.
USD & Other Major Pairs
Across the board, the US dollar continues its decline. On Wednesday, the USD/CAD is trading at a 2.5-year low, currently residing around the 1.2700 marks. The USD/CHF pair made a new multi-year low earlier today as the exchange rate dived to a low of 0.8826, a level last touched on Jan 26, 2015.
The EUR/USD is trading strongly to the upside in the early hours of the European session on Wednesday. The pair pierced through the previous resistance at 1.2150-1.2180 which has been keeping the lid for December. EURUSD reached a new high today, peaking at 1.2212, a mark not seen since Dec 29, 2014.