USDJPY: the path of least resistance remains to the downside

FX:USDJPY   U.S. Dollar / Japanese Yen
Unstable investor sentiment prevents the USDJPY pair from a more robust recovery. The financial markets fail to show a steady rise due to a number of risk factors, from US-China trade war to Brexit and global growth. Against this backdrop, safe haven demand prevails and helps the Japanese yen to stay afloat even as the Bank of Japan continues to adhere to its ultra-loose monetary policy .

Another hurdle for the greenback is the growing market fear of a pause on rate hike cycle by the Federal Reserve . In this context, the December Fed meeting will be the key event for the pair. Despite the lingering doubts, the central bank will likely hike for the fourth time this year. But much will depend on the Powell’s tone, as a cautious or even somehow “dovish” rhetoric could dump the dollar across the board.

USDJPY struggles to stay above the 113.00 hurdle this week. The dollar needs some impetus, including higher Treasury yields, to make a clear break above this level. Otherwise, the risk of a slide to 112.30 will grow. The pair will turn bearish on a break below the 112.00 support. As the risk aversion still prevails, the path of least resistance remains to the downside.