The pair is the main mover so far on the day, with it being down 0.5% to 138.80 levels. The dollar was mostly softer across the board but has recouped some losses against other major currencies as we get into European trading. Going back to USD/JPY, the thing to note is that the pair has fallen back below its 100-day moving average (red line) now:
There is still some minor daily support from the recent lows around 138.45 and then the 15 November low at 137.65 to follow. Besides leaning on the technicals, there isn’t much else for traders to work with for the remainder of the week. Holiday-thin trading will make things a little tricky as well in navigating through the coming sessions.
Anyway, as Treasury yields continue its retreat, that will keep the pressure on USD/JPY as well when looking at the fundamental side of things. That continues to make the bond market a key driver for what comes next for the pair. In other words, market sentiment towards the Fed will remain a critical factor and that will be a balance between what economic data says and what the Fed says or do.