USD/JPY dives to over one-week low, 114.00 back in sight ahead of US ADP report

• USD/JPY prolonged its bearish trend for the fourth straight day amid sustained USD selling.
• Break below the 200-hour SMA, around the 114.55 area, aggravated the bearish pressure.
• Investors now look forward to the US ADP report for some short-term trading opportunities.

The USD/JPY pair continued losing ground through the mid-European session and dropped to over a one-week low, around the 114.25 region in the last hour.

The pair witnessed heavy selling for the fourth successive day on Wednesday and has now retreated nearly 150 pips from the 115.70 area, or a three-week high touched last Friday. Less hawkish comments by Fed officials accelerated the recent US dollar retracement slide from the post-FOMC swing high to the 18-month peak, which, in turn, exerted pressure on the USD/JPY pair.

In fact, St. Louis Fed President James Bullard (a noted hawk) and Philadelphia Fed President Patrick Harker pushed back against market bets and downplayed the prospect of a 50bps hike in March. Bearish traders further took cues from a softer tone surrounding the US Treasury bond yields, which further undermined the greenback and contributed to the USD/JPY pair's ongoing decline.

Apart from this, the downfall could further be attributed to some technical selling below the 200-hour SMA support near the 114.55 area. The USD/JPY pair's inability to attract any buying at lower levels favours bearish traders. This, along with the conflict between Russia and the West over Ukraine, which tends to benefit the safe-haven Japanese yen, supports prospects for further losses.

Market participants now look forward to the US economic docket, highlighting the release of the ADP report on private-sector employment. Apart from this, the US bond yields will influence the USD price dynamics and provide some impetus to the USD/JPY pair. The focus, however, will remain on the closely-watched US monthly jobs report – popularly known as NFP due on Friday.

Technical levels to watch