The USD/JPY pair extended the previous day’s post-US CPI downfall and witnessed heavy selling for the second successive day on Wednesday. The downward trajectory extended through the first half of the European session and dragged the pair to near one-month lows, around the 109.25 region in the last hour.
Worries about the fast-spreading Delta variant and a global economic slowdown benefitted the safe-haven Japanese yen. Apart from this, the emergence of some fresh selling around the US dollar exerted additional pressure on the USD/JPY pair. Bears further took cues from a modest downtick in the US Treasury bond yields.
The combination of factors dragged the USD/JPY pair below the 109.60-50 support zone, marked by the lower end of a four-week-old trading range. This, along with the fact that oscillators on the daily chart have just started drifting into the negative territory, has set the stage for a further depreciating move.
Hence, a subsequent slide towards the 107.00 round-figure mark, en-route August monthly swing lows, around the 108.70 region, remains a distinct possibility. Some follow-through selling will be seen as a fresh trigger for bearish traders and pave the way for a fall towards the next relevant support near the 108.35 region.
On the flip side, the trading range support breakpoint, around the 109.50-60 region, now seems to act as an immediate hurdle. Any further recovery move could attract fresh selling at higher levels and runs the risk of fizzling out quickly. This should cap the upside for the USD/JPY pair near the key 110.00 psychological mark.