USD/JPY refreshes weekly low below 109 as greenback falters

After spending the majority of the day moving sideways above the 109 handle, the USD/JPY pair lost nearly 50 pips in NA session as the buck caught fresh offers and plummeted to its lowest level since August 29. As of writing, the pair was trading at 108.75, losing 0.88% on the day.

The US Dollar Index, which was able to erase its bearish gap to close the day higher at 92.77 on Monday, failed to build on its gains during the day and fell towards the 92 handle amid a soft factory orders data, which came in at -3.3% on a monthly basis in July after expanding by 3.2% in June, and some dovish comments from the FOMC member Lael Brainard. At the moment, the DXY is at 92.23, down 0.37% on the day.

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On the other hand, as American investors came back from the 3-day Labor Day weekend, they reacted by staying away from riskier assets on escalating geopolitical tensions between North Korea and the United States. The negative market sentiment, which boosts the demand for safe-haven currencies like JPY, is also reflected upon the major equity indexes in the U.S. with the Dow Jones Industrial Average losing 1.2% and the S&P 500 dropping 1% at the time of writing.

Later in the session, a couple of FOMC members, Minneapolis Fed President Kashkari and Dallas Fed President Kaplan, will also be delivering speeches. A cautious approach to another rate hike in 2017 could increase the pressure on the greenback, allowing the pair to extend its losses.

Technical outlook

The RSI indicator on the daily graph hasn't reached the 30 mark, suggesting that the downfall could continue before the pair shows overbought conditions. 108.25 (Aug. 29 low) could be seen as the first technical support followed by 107.75 (Nov. 15, 2016, low) and 107 (psychological level). On the flip side, resistances align at 109.60 (20-DMA), 110 (psychological level) and 110.60 (50-DMA).

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