USD / JPY bounces near 104.10, still not out of the woods

• USD / JPY attempts a bounce from near the 104.10 level.
• The bears are still looking for a test of the September lows at 104.00.
• The pair remains at the mercy of risk trends and USD dynamics.

The pair USD/JPY moves lower during the European session on Friday, trading around the 104.40 region after managing to bounce near the 104.10 level earlier in the day.

USD / JPY remains under strong selling pressure during Friday’s European session, as bears expect a break below the September low of 104.00. amid a lingering risk-off feeling.

Thursday’s strong rebound from the five-week lows of 104.03 to 104.72 has almost come to an end, with sellers coming back and sending the pair down on Friday.

USD / JPY faces three different catalysts. Risk aversion sparked by the COVID-19 resurgence is benefiting the safe-haven JPY, while easing travel restrictions in Japan and a widespread pullback in the US dollar also weigh on the pair.

The safe-haven Japanese yen continues to gain strength as rising coronavirus cases in the US and Europe weaken market sentiment and it drags the stock markets down.

Further, the Japanese government lowered the infection risk advisory for China, Australia and other countries up to level 2 from level 3, which also helped the yen regain lost ground.

In the meantime, the retreat of the US dollar from monthly highs compared to its main competitors, due to the fall in Treasury yields, it exacerbated the fall in the USD / JPY.

It now remains to be seen if the bulls manage to defend the 104.00 level, as the USD could rebound if risk aversion deepens during the day.

USD / JPY technical levels

The bears are now targeting the September low of 104.00, below which a strong support is expected at 103.75 (S2 Pivot Point support). On the other hand, Thursday’s high of 104.72 could be tested if the bulls regain control, with their focus on the round 105.00 level.