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USD/JPY: Buyers and sellers jostle around 109.70 amid broad risk-off

  • USD/JPY looks for clear direction amid mixed plays.
  • Risk aversion remains dominant with coronavirus keeping the driver’s seat.
  • Broad US dollar gains restrict the pair’s declines.
  • Second-tier Japanese data, global headlines will be important to watch.

USD/JPY remains modestly changed to 109.68 during the early Monday morning in Asia. That said, the pair began the week’s trading with a gap down to 109.66 from Friday’s close to 109.77. With the US dollar and Japanese yen both having safe-haven allure, traders are struggling to justify the broad risk-off. However, comparatively stronger US fundamentals have been playing their role off-late.

Fears of China dominate trade sentiment…

Coronavirus fears regain market attention as global producers and central banks raised concerns about the economic impact of the Chinese epidemic. The official death toll surpassed SARS, to 811 by the end of February 08, while the number of people infected from the deadly virus inside Beijing’s borders reached 37,198.

In addition to companies like Apple and Hyundai, the US Federal Reserve also cited coronavirus risk in its semi-annual report to congress.

With this, efforts to placate global traders by China and the World Health Organization seem to fall on the deaf ears and fail to support the global bond yields. The US 10-year treasury yields dropped six basis points (bps) to 1.58% whereas bund yields also declined 1.5 bps to -38.7 (bps) by the end of their trading on Friday.

US fundamentals remain positive…

Be it activity numbers or the headline employment data, the US economics are well in shape and favors the US dollar to keep the helm. On Friday, January month Nonfarm Payrolls grew 225K and propelled the three-month average to 209K from 188K. However, revisions to 2018 and 2019 numbers seem to limit the greenback’s gains.

This could also be witnessed in the market’s favor for the US dollar. The Australia and New Zealand Banking Group (ANZ), based on positioning data for the week ending February 4, 2020, said that the funds turned USD buyers after four straight weeks of selling, while asset managers bought USD for the fourth consecutive week. 

Japan’s December month trade balance and Eco Watchers Survey for January will be the immediate catalysts amid no major data from the US. However, updates concerning coronavirus will be the key to watch.

Technical Analysis

21-day SMA near 109.50 acts as the immediate support whereas the quote’s rise beyond 110.00 could challenge the yearly top near 110.30.

 

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