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USD/JPY: Bears dominate near 108.30 as coronavirus remain in headlines

  • USD/JPY stays on the back foot amid increasing fears of coronavirus outbreak.
  • Weekend news suggests increasing numbers of coronavirus affected people, the first death outside China.
  • All eyes on the Chinese market’s open, Bejing announced multiple steps to keep the likely bloodshed in control.

USD/JPY remains under pressure around 108.30, near the lowest since early-January, as the Asian markets open for the week’s trading on Monday. Fears of coronavirus outbreak have grown stronger during the weekend as numbers of affected crossed 14,300 while the death toll rose beyond 300 mark. Adding to this is another virus outbreak from China, the H5N1 bird flu, that occurred in Hunan.

Read: What you need to know when markets open: Coronavirus headlines keeping markets on edge

Coronavirus troubles Beijing’s diplomats as markets re-open…

China’s domestic markets will be up for trading for the first time since January 23 as the extended Lunar New Year holidays come to an end. The time has changed a lot during this vacation, with coronavirus weighing heavily on investor sentiment. The epidemic caused more than 300 lives in China and has affected 14,380, as per Sunday’s report from China's state broadcaster CCTV. In doing so, the contagion crossed SARS that threatened markets in 2002/03. To identify the severity of the problem, the World Health Organization (WHO) announced coronavirus as the international medical emergency.

Adding to the tension is an outbreak of the deadly H5N1 bird flu in a farm in the Shuangqing district of Shaoyang city, as per the South China Morning Post (SCMP).

Read: Coronavirus update: Total number of confirmed cases climbs to 14,380

Given the fears of the outbreak, the majority of international flights have stopped operations connecting China while arranging for special planes to recall their nationals living in the dragon nation.

The Chinese government has already forgone the New Year celebrations while trying to safeguard, limit the virus outbreak. However, Vice Governor of Hubei Province, where the virus originated, conveyed his worries and pour cold water on the government’s efforts.

While identifying the threats of broad selling, authorities in China have already taken steps to curb any bloodshed as the markets open for trading on Monday. The central bank, People’s Bank of China (PBoC) has said to provide 1.2 trillion yuan liquidity to support money markets and ease the sell-off whereas securities’ regulator advised stopping short selling of stocks. Further, the authorities have also advised banks to continue to provide lending to companies affected by the outbreak.

To portray this, the US 10-year treasury yields stay near multi-week low to 1.5% whereas global stocks also marked the risk-off.

Investors will keep eyes on coronavirus impact and how Chinese traders perform during their first day of trading to determine near-term trade direction. Additionally, Brexit and manufacturing numbers from Japan and the US will also entertain traders.

Technical Analysis

The previous month low surrounding 107.65 holds the key to pair’s further declines towards October lows near 106.50 while an upside clearance of 100-day SMA, at 108.75 now, can recall 109.30.

 

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