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USD/JPY: Bulls in charge, seeking 110 handle as risk sentiment improves

  • USD was a top performer with a rise in yields and firmer US data.
  • Chinese researchers have developed a drug that is effective in treating the coronavirus.

USD/JPY is trading on the bid, although capped below the 110 handle as traders await the US Nonfarm Payrolls at the end of the week for further evidence of a hotter economic performance and the start of the year for the world's largest economy. USD/JPY is currently trading at 109.79 having travelled from a low of 108.31 at the start of this month. 

USD/JPY climbed well from 109.30 to 109.70 on the China medical research headlines, with bulls tracking down the 110 handle. Despite a recovery in US on Wall Street, US bonds yields rose throughout the trading day, supportive of a recovery in the US, widening the JPN/US spread in favour of the greenback back again. The US 10-year yields led global bonds, putting on +6bps to test 1.66% (1.58% to 1.64% on news that Chinese researchers had developed a drug that was effective in treating the coronavirus).

US data hotting up

Additionally, it was another good day for US data. The Jan non-manufacturing ISM climbed to 55.5 from 54.9 in Dec, beating expectations (55.1) which makes for a solid backdrop for this week's Nonfarm Payrolls. There was further confirmation in the US Jan ADP private payrolls survey which came in a lot hotter than expectations. It was the strongest number since May 2015 and was pushing estimates of 160k for Friday’s NFP.

January ADP jobs rose 291k, confirming that the labour market got off to a brisk start for 2020. "Job gains were concentrated in medium-sized firms (50–499 employees), which hired 128k workers. Small firms hired 94k and large firms hired 69k. Goods producing jobs added 54k and services rose 237k. The US have not had a recession, since the Bretton-Woods/Smithsonian Agreement, without service sector jobs contracting. So the data will lift growth and earnings expectation," analysts at ANZ Bank explained. 

USD/JPY levels

 

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