FxWirePro: USD/JPY extends losses after gap-down open, China's rate cut fails to bring relief to risk assets

USD/JPY chart - Trading View 

USD/JPY opened the week's trade with a gap-gap down and is extending losses as we write.

The pair was trading 0.56% lower on the day at 107.30 at around 03:00 GMT, after closing 1.50% lower in the previous session.

The PBOC (People's Bank of China) earlier today cut the seven-day reverse repo rate to 2.2% from 2.4% and injected 50 billion yuan or $7 billion into the banking system.

The central bank's rate cut and the liquidity injection have failed to put a bid under the risk assets.

The major may extend declines on fears the Japanese government may declare a state of emergency due to the worsening COVID-19 situation. 

Japan's Cabinet Secretary Suga was out on the wires informing markets about the possibility of declaring an emergency in Japan. 

Technicals too support weakness for the pair. Price action has slipped below 200-DMA. Oscillators are on verge of rollover from overbought levels.

Drag till 61.8% Fib at 105.204 likely. Bearish invalidation only on retrace above 200-DMA.

Major Support Levels: 106.48 (Oct 3 low), 105.20 (61.8% Fib)

Major Resistance Levels: 108.30 (200-DMA), 109.78 (200H MA)

Guidance: Good to stay short on upticks, SL: 108.50, TP: 107/ 106.50/ 106