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USD/JPY: Yen bulls regain control as Nikkei plunges, below 120

FXStreet (Mumbai) - USD/JPY met fresh supply near 120.40 and extends the drop below 120 handle in the mid-Asian session, as the JPY bulls fought back lost ground and stormed their way through the 120 barrier.

USD/JPY drops from 120.30 region

Currently, the USD/JPY pair trades -0.30% at fresh session lows of 119.88, retreating from session high posted at 120.39 levels at Tokyo open. The Japanese yen erased losses and swung back into the green zone versus the greenback, after the sharp fall in Japan’s stocks reinforced risk-aversion across the board.

After a 3-day break, the Japanese traders returned to markets and joined the global of risk-off sentiment, driving the Nikkei -2.40% lower at 17,640, thus increasing the safe-haven bids for the yen.

Meanwhile, the pair ignored the weak Japan's manufacturing PMI report and tracks the broader market sentiment which may continue to favour the Japanese currency.

However, markets continue to follow ‘buy on dips’ theme for USD/JPY, which may see fresh bids coming through near 119.60-50 levels, taking the pair higher towards 120.50 region.

Looking ahead, markets shift their attention towards key US durable goods orders data due later tonight and Friday’s inflation figures from Japan for fresh incentives.

USD/JPY Technical levels to consider

To the upside, the next resistance is located 120.64 (Sept 22 High) levels and above which it could extend 121.02 (Sept 17 High). To the downside immediate support might be located at 119.61 (Sept 23 Low) below that at 119.38 (Sept 15 Low) levels.

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