The selling pressure surrounding the US dollar has intensified during the European session on Tuesday, as risk sentiment has improved after some hesitation in Asia. Still, the dynamics in the USDJPY pair shows investors continue to express a cautious tone as the coronavirus pandemic persists. The pair dipped to nearly 1.5-month lows, having accelerated the bearish movement after a break below the ley 107.00 handle.
As such, the yen remains elevated for the fourth straight session due to the prevailing cautious mood in the global financial markets. However, the downside pressure surrounding USDJPY may ease down the road as investors will soon shift their focus to the upcoming Federal Reserve and ECB meeting due on Wednesday and Thursday, respectively. It is highly anticipated that major central banks will deliver a dovish tone and even take additional stimulus measures to support the struggling economy amid the virus outbreak.
So, while USDJPY remains depressed in the short-term, buyers may reemerge on the current dip and lift the prices back above 107.00. Moreover, by the end of the week, the pair may exceed the 107.50 area but there are low chances for a break above the 50-DMA, where the 20-DMA lies as the greenback lacks appeal at this stage.
USDJPY slipped to mid-March lows around 106.60 and could extend losses to the 106.30 area that is standing on the way toward 106.00. Such a scenario may come true today if the upcoming data out of the United States disappoint and trigger risk aversion. If so, the prices will likely shift into a recovery mode and regain the upside impetus some time later.
In the longer run, a sustainable bounce, or even a bullish move will be possible as soon as the coronavirus pandemic reaches its peak. Of note, should the improvements be spectacular, the dollar may stage a strong rally from the current or lower levels. On the upside, there are strong resistance levels in the 107.80-108.80, where the key moving averages lie.