The US dollar dropped on Tuesday amid concerns of the rising coronavirus cases in Europe and the US, and uncertainties surrounding the US election. How will it move against the Japanese yen in the coming weeks?

On Monday, the USDJPY gained slightly amid the US, Russia, and France seeing a second wave of coronavirus infections. New protocols have been enforced. European countries including Belgium, Croatia, the Czech Republic, France, and Germany have also recently recorded their highest daily counts since March.

Hopes for another US fiscal stimulus grow meek as Washington policymakers revealed very little clues about it happening in the near future. The US dollar will delight in a negative fiscal stimulus. Despite the previous gain, USDJPY dropped on Tuesday as bears took control of the market. 

The USDJPY pair is on a downtrend for quite a while now. Margin traders would do well to closely observe the large psychological level at ¥105. According to a forex analyst at UOB Group, the outlook remains negative, and the price drop could extend further to the ¥104 level in the coming weeks.

USDJPY trajectory in the past 3 months [1D chart], SimpleFX WebTrader

Support for the USDJPY pair is now at ¥104.73 and then at ¥104.52. The pair is currently testing the ¥104.91 resistance, which can go forward towards ¥105.12 if the tide gets better. At present, USDJPY is trading at ¥104.50 (3:17 pm UTC).

The US election uncertainties add more pressure to the markets. Many traders foresee a larger US stimulus package if Biden takes the presidential seat and the Democrats take over the Senate. The spending will weaken the US dollar more.

The gap in the election polls is narrowing a bit between Biden and Trump, and the risk tone can be tighter as the election date on November 3 nears. If the gap widens toward the end of the week, the markets could lean towards positive risk, which could stomp on the US dollar and push the Japanese yen further up.

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