USD/JPY drops further to test 5-DMA, Brexit looms

The USD/JPY pair fell back in the red after a brief reversal seen yesterday as the JPY bulls snatched control amid unnerved markets on lingering concerns about the UK’s fate in the EU.

USD/JPY offered just ahead of 105 handle

The demand for the safe-haven yen resurfaced as investors turned cautious and sought safety bets ahead of the main market moving event for months to come, the EU referendum scheduled tomorrow. At the time of writing, USD/JPY drops -0.30% and mires near session lows of 104.37, where 5-DMA intersects.

Adding to the negative bias, the slump in the Japanese stocks also boosted the safe-haven flows for the Japanese currency and hence, dragged the USD/JPY pair towards 104 barrier. The Nikkei 225 index plunges -1.03% to trade around 16k mark.

While the major also remains pressured by the dovish tone maintained by the Fed Chair Yellen in her prepared remarks, as she testified before the Senate Banking Committee in Washington a day before.

Meanwhile, the sentiment around oil and stocks will continue to dominate yen markets amid dozens of Brexit headlines crossing the wires.

USD/JPY Technical levels to watch

In terms of technicals , the immediate resistance is located at 104.84 (Jun 17 high). A break above the last, the major could test 105.05 (Jun 21 high). While to the downside, the immediate support is seen at 104 (round number) and below that at 103.56 (Multi-month low).