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USD/JPY nears multi-week low as Corovirus headlines keep the risk-off active

  • USD/JPY remains under pressure around the lowest since early October 2019.
  • Coronavirus continues to spread outside China, global central bankers ready to take steps.
  • Activity numbers, US NFP will be important to watch this week.

Following its drop of more than 1.5% to the lowest since October 10, 2019, USD/JPY stays on the back foot around 107.40 as the Asian session begins on Monday. The pair slumped to a 20-week low on Friday amid a rush to risk-safety on the fears that coronavirus (COVID-19) will trigger a global recession. Though, noticeable was the day-end pullback triggered by the US Fed Chair Jerome Powell’s comments.

Read: What you need to know before markets open: Coronavirus risk-off remains the theme, yen crosses in focus

It’s all about COVID-19…

With the coronavirus cases rising speedily outside China, investors fear the return of the year 2008-like recession due to the contagion weighing on the global supply chain as well as activities. The resultant push drives the traders towards the safe-heavens like Japanese yen and Gold.

While South Korea has been the most infected nation outside China, with a total of 3,736 by Sunday, markets are more concerned about the first death in the US due to the deadly. Also in the spotlight are increasing numbers in the UK as well as Europe.

Following the first death due to Coronavirus in the US, the Trump administration is considering special measures, like targeted tax cuts and additional push to the Fed for a rate cut, as per the Washington Post. However, the Fed Chair Jerome Powell may like the government advice this time as he signalled the Fed’s readiness to “use tools and act as appropriate to support the economy.”

Elsewhere, the UK PM also mentioned about the rising numbers of cases and the British Health Minister Matt Hancock showed readiness to adopt Chinese-style city blocks to prevent the deadly virus from spreading further. Furthermore, France registered a hike in COVID-19 cases whereas Italy’s Economic Minister announced that the government will release a 3.6 billion Euros ($3.5 billion) package to counter the economic impacts.

China got its official PMIs out during the weekend and they were worst. The headline Manufacturing PMI dropped to the record low of 35.7 while the Non-Manufacturing PMI also tested a historical bottom of 29.6. Traders will now await the private release, Caixin Manufacturing PMI, for further confirmation.

That said, the risk barometers behaved wildly off-late. The US 10-year treasury yields slumped to the historical low of 1.126 on Friday. However, Wall Street registered bounce by the day-end, on Fed Chair Powell’s remarks, despite marking the largest losses in a week since 2008.

Japan’s Jibun Bank Manufacturing PMI, expected to remain unchanged at 47.6, followed by the US ISM Manufacturing PMI and Markit Manufacturing PMI, will decorate today‘s economic calendar. Though, major attention will be given to coronavirus headlines.

Technical Analysis

Sustained break of the upward sloping trend line stretched from October 2019, near 108.25/30 now, pushes the pair towards August 2019 top surrounding 107.00.

 

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