USD/JPY hangs near multi-week lows, around 109.25 region

The USD/JPY pair edged lower through the Asian session and was last seen trading near daily lows, around the 109.25-20 region.

The pair struggled to capitalize on the previous day's modest bounce from the 109.10 area, or near one-month lows, instead met with some fresh supply on Thursday. This marked the third successive day of a negative move and was sponsored by a combination of factors.

The softer US CPI report raised uncertainty over the likely timing of the Fed's tapering plan and kept the US dollar bulls on the defensive through the early part of the trading action. This, in turn, was seen as a key factor that acted as a headwind for the USD/JPY pair.

On the other hand, worries about the fast-spreading Delta variant and a global economic slowdown benefitted the safe-haven Japanese yen. This, along with a modest downtick in the US Treasury bond yields, inspired bearish traders and exerted pressure on the USD/JPY pair.

Meanwhile, the overnight decline confirmed a near-term bearish break below support marked by the lower boundary of a multi-week-old trading range, near the 109.50-45 region. Hence, the downfall could further be attributed to some follow-through technical selling.

That said, investors still seem convinced that the Fed would begin rolling back its massive pandemic-era stimulus later this year. This should hold traders from placing aggressive bearish bets ahead of the FOMC meeting on September 20-21 and help limit any further losses.

Market participants now look forward to the US economic docket, highlighting the releases of monthly Retail Sales figures, Philly Fed Manufacturing Index and Weekly Initial Jobless Claims. Apart from this, the US bond yields, the USD price dynamics and the broader market risk sentiment might produce some trading opportunities around the USD/JPY pair.

Technical levels to watch