USD/JPY: Sell-off extends towards 104 amid JP stimulus talks

Having faced rejection at 105 handle, the USD/JPY pair dropped sharply to hit fresh weekly lows near 104.60 region, before recovering some ground on bearish Japanese government growth forecasts.

USD/JPY head towards 104 handle?

The bearish pressure behind the dollar-yen pair accelerated in the late-Asian/ early European trades, knocking-off the rate to fresh eight-day lows closer towards 104 handle. The yen picked-up significant strength over the last hours, with the Japanese officials still mulling over the size of the stimulus package, which suggests that the government would not be able to fulfill markets' expectations.

JP Govt is considering 6 tln yen of new spending, of which only about 2 tln will be coming in the supplementary budget. Markets had expected stimulus package to the tune of 20 to 30 tln yen.

Moreover, the latest comments from Japanese FinMIn Aso, indicates that the Govt has shifted the onus of the policy measures in the hands of the BOJ. Furthermore, extension of the losses in the Nikkei 225 index also adds to the downside in the major.

At the time of writing, the USD/JPY pair slumps -1.40% to fresh eight-day lows of 104.28, while the Nikkei 225 index drops -1.64% to 16,347 levels.

USD/JPY Technical levels to watch

In terms of technicals , the immediate resistance is located at 105.79/83 (5 & 10-DMA). A break above the last, the major could test 106 (round number). While to the downside, the immediate support is seen at 104.16 (20-DMA) and below that at 103.89 (Jul 13 low).