USD / JPY recovers from lows, still negative below 104.50

• USD / JPY is moving on a negative bias amid a slightly softer tone around the USD.
• Biden is a little closer to winning the US presidential election, weighing on the USD.
• The bullish market sentiment weighs on the safe-haven JPY and helps limit the slide.

The pair USD/JPY remains under pressure during the first half of Thursday’s trading action, although it has lacked strong follow-up and remains with slight daily losses around the 104.30 region at the start of the European session.

After the strong movement of the previous day in both directions, the pair has encountered new sales and been pressured by a softer tone around the US dollar. Democratic candidate Joe Biden won the key battlefield states of Wisconsin and Michigan, raising his electoral count to 264 against the 270 needed to declare victory. This was seen as one of the key factors that have weighed on the dollar.

That said, the end result of the US election is now dependent on the vote count of a few remaining swing states. Further, Trump has already filed lawsuits and a new count in Pennsylvania and Michigan. The greatest uncertainty could drag on for days or even weeks, which may extend some support to the safe-haven Japanese yen and further contribute to the selling tone in the USD / JPY pair..

Meanwhile, the failure to achieve a Democratic victory in the Senate and House of Representatives has clouded the prospects for large stimulus packages to help the economy affected by COVID-19. This has been evident by the current decline in US Treasury yields, which has further weighed on USD demand. But nevertheless, market optimism has weighed on the JPY and it has helped cap deeper losses for the USD / JPY pair, at least for now.

Even from a technical perspective, the pair has shown some resistance near the round level 104.00. This warrants some caution for bears and makes it prudent to wait for a sustained break below the mentioned level before positioning for any other short-term downside moves. However, political developments in the US will continue to play a key role in influencing the USD / JPY pair.

Thursday’s US economic calendar features the release of initial weekly jobless claims. However, the data is unlikely to provide a significant boost and the key focus of attention will remain the latest update of the monetary policy of the FOMC, to be published later during the American session.