USD/JPY drops in tandem with US dollar, weakest since mid-March

• USD/JPY tracks the dollar lower as risk sentiment improves.
• Lockdown easing plans cheered amid deepening economic contraction.
• The spot falls below all major DMAs ahead of the key US data.

USD/JPY broke the recent consolidative range to the downside in Europe this Tuesday, now extending the losses below 107.00. At the time, of writing, the spot sheds 0.46% and flirts with a fresh six-week low of 106.61.

The major tracked the renewed selling-wave that gripped the US dollar against its six major peers, with DXY downed to fresh nine-day lows near 99.60. Markets flocked to riskier assets such as the European stocks, Antipodeans etc. at the expense of the safe-haven, the greenback.

The turnaround in the risk sentiment can be mainly attributed to the expectations of an economic upturn sooner, as some of the economies globally consider easing lockdown restrictions. Further, a slew of strong earnings reports from companies, including Novartis and UBS, and the solid rebound in oil prices also added to the upbeat market mood.

However, it remains to be seen if the recovery in the risk sentiment sustains, as the US Consumer Confidence data could throw fresh hints on the US economic situation, in the face of the coronavirus pandemic.

Note that the major continues to remain at the mercy of the dollar dynamics and risk trends, as markets shrugged off the recent monetary easing announced by the Bank of Japan (BOJ).

The pair looks vulnerable after it fell below all the major daily moving averages (DMAs), with the next support aligned at 106.00 (round number), below which the March 17 low at 105.86 could be tested. On the flip side, 107.30, the confluence of 5-DMA and the daily pivot point is the level to beat for the bulls.

USD/JPY additional technical levels to consider