USD/JPY drops down during the early Thursday’s trading. The yen pair ignores off in Japan while cheering the US dollar weakness. The US dollar index (DXY) drops to the fresh multi-month low of 89.51. The cautious optimism over the US coronavirus (COVID-19) stimulus and vaccine favor, coupled with the passage of the Brexit deal, exerts an initial burden on the greenback. The two cases of covid strain, in Colorado and California respectively, that earlier shook the UK could also challenge the greenback.

Recently, the US sent two aircraft to the Middle East and Taiwan Strain and the same can renew geopolitical tension. Further, the comments from Japanese Economy Minister Nishimura also highlight fears of a national emergency considering the latest jump in the virus cases.

Japanese Economy Minister Yasutoshi Nishimura said on Thursday, Japan may consider a state of emergency on virus rate. During the latest coronavirus (COVID-19) update, the Kyodo news said, “The Tokyo metropolitan government reported 944 cases of the novel coronavirus on Wednesday, marking the second-highest daily tally on record and prompting Gov. Yuriko Koike to warn that the capital is facing “a third wave” of infections of an ‘unprecedented magnitude.’”

“Across Japan, virus cases have been increasing in December, and a total of 3,852 new cases were reported on Wednesday, the second-highest level on record,” the news added further.

Considering the lack of major data along with a close in multiple markets due to New Year’s Eve, USD/JPY traders are likely to remain in the current downtrend. However, any drastic changes from the US Congress, relating to the $2,000 paycheck, or a surprise drop in weekly US jobless claims, can trigger a bounce of the pair.

 USD/JPY 4 Hour Chart:

Support: 102.89 (S1), 102.62 (S2), 102.27 (S3).

Resistance: 103.52 (R1), 103.86 (R2), 104.14 (R3).

In the meantime as the Yen enjoys the broad US dollar weakness, we expect a bearish trend for USD/JPY.