USD/JPY drops to two-week lows near 103.00

• USD/JPY broke below the weekly trading range on Wednesday.
• USD continues to lose strength against its major rivals.
• Risk flows could limit USD/JPY's downside in the second half of the day.

The USD/JPY pair spent the last few days fluctuating in a horizontal range between 104.00 and 103.50. With the broad-based USD weakness remaining intact on Wednesday, the pair broke below that range and touched its lowest level in two weeks at 103.04. As of writing, USD/JPY was losing 0.47% on a daily basis at 103.07.

The greenback continues to have a difficult time finding demand heading into the new year. Ahead of the Goods Trade Balance, Pending Home Sales and Chicago Purchasing Managers' Index data from the US, the US Dollar Index is down 0.35% at 89.67.

In the meantime, risk flows continue to dominate the financial markets on Wednesday. At the moment, the S&P 500 Futures are up 0.33% on the day and the 10-year US Treasury bond yield is gaining nearly 1%. If the market mood remains upbeat in the second half of the day, the JPY could struggle to gather further strength against the USD.

USD/JPY near-term outlook

“USD/JPY is technically bearish, according to the 4-hour chart, as it accelerated its slump below all of its moving averages, with the 20 SMA turning south below the longer ones," says Valeria Bednarik, Chief Analyst at FXStreet. "The decline will likely continue, mainly if the pair breaks below this month´s low at 102.86.”

Additional levels to watch for