USD/JPY off lows, still deep in the red below mid-105.00s

• USD/JPY came under some aggressive selling pressure on news that PM Abe will resign.
• The heavily offered tone surrounding the USD further contributed to the steep decline.
• The risk-on mood undermined the safe-haven JPY and might help limit any further slide.

The USD/JPY pair maintained its heavily offered tone through the early North American session, albeit has managed to rebound around 20-25 pips from daily swing lows. The pair was last seen trading near the 105.40-50 region.

The pair witnessed a dramatic intraday turnaround on Friday in reaction to the news that Japan's Prime Minister Shinzo Abe is stepping down. This coupled with the heavily offered tone surrounding the US dollar further contributed to the USD/JPY pair's sharp fall of around 175 pips from the vicinity of the 107.00 mark.

The greenback was being weighed down by the Fed Chair Jerome Powell's comments on Thursday, saying that the Fed is willing to allow inflation to overshoot the 2% target for some time in order to compensate years of undershooting. This, in turn, raised speculations that the Fed could keep rates lower for longer.

The USD bearish pressure remained unabated following the release of mixed US economic data – the Core PCE Price Index, Personal Income and Spending data. Apart from this, the downfall could further be attributed to some technical selling below a near one-month-old ascending trend-line support, around mid-105.00s.

However, the prevalent bullish mood in the equity markets undermined the Japanese yen's safe-haven demand and extended some support to the USD/JPY pair amid intraday oversold conditions. Nevertheless, the pair remains on track to end the week on a downbeat note and might have already turned vulnerable to extend the downfall.

Technical levels to watch

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