- USD/JPY turns lower for the second consecutive session amid sustained USD selling bias.
- The prevalent risk-on mood might undermine the safe-haven JPY and help limit losses.
The USD selling pressure picked up pace during the early European session and dragged the USD/JPY pair to two-week lows, around the 108.55 region in the last hour.
The pair struggled to capitalize on its early uptick to the 108.85 region, instead met with some fresh supply and drifted into the negative territory for the second consecutive session on Tuesday. The downtick was sponsored by the prevalent bearish sentiment surrounding the US dollar and seemed unaffected by the upbeat market mood, which tends to undermine the safe-haven Japanese yen.
The White House pared down the infrastructure bill to $1.7 trillion from $2.25 trillion and eased fears about runaway inflation in the US. This, in turn, forced investors to trim their bets over an inflation-driven rate hike and dragged the key USD Index to the lowest level since January. Bearish traders further took cues from the recent decline in the US Treasury bond yields.
In fact, the yield on the benchmark 10-year US government bond dropped back to the 1.60% threshold, which was seen as another factor that acted as a headwind for the greenback. That said, an extended rally in the global equity markets might hold traders from placing aggressive bearish bets and help limit any further losses for the USD/JPY pair, at least for the time being.
Market participants now look forward to the US economic docket, highlighting the release of the Conference Board's Consumer Confidence Index later during the early North American session. In the meantime, the US bond yields will influence the USD price dynamics. Apart from this, the broader market risk sentiment will also be looked upon for some short-term opportunities.