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USD/JPY portrays latest risk reset, still under 108.00

  • USD/JPY remains inside a short-term symmetrical triangle after Monday’s positive close.
  • Market’s risk-tone seems to have recovered off-late amid comments from the US, receding cases of Italy/Spain.
  • Japan’s February month data dump, COVID-19 headlines will offer trade direction.

USD/JPY portrays a lack of momentum, despite following Monday’s recovery gains, while taking rounds to 107.85 amid the early Asian session on Tuesday.  While a bit of positive news from Italy and Spain triggered risk reset earlier, comments from the US policymakers seem to have recently favored the risks.

After multiple fatalities and many days of pessimism, the latest numbers from Italy and Spain showed signs of fading the earlier rise. As per Monday’s figures, Italy registered the lowest coronavirus (COVID-19) cases, 4,050, since March 17 whereas Spain also marked a reduction in the death toll to 812 from 838. However, fears are still looming over the US as cases surged to 140,904 from 122,653 during the same period.

In addition to data from the global COVID-19 hot-spots, expectations that the lockdowns in many economies are paying also contributed to the risk reset. Also pleasing the risk-tone could be the latest comments from US President Donald Trump from the Task Force Briefings that turn down nationwide stay-at-home orders. It should also be noted that the pullback in the US dollar also favored the yen pair to stop the previous declines and portray a Doji formation on the daily chart.

While Wall Street aptly portrayed the risk reset, the US 10-year treasury yields remain on the back foot near 0.72% by the end of their trading session on Monday.

Japan’s February month Unemployment Rate, Retail Sales and Industrial Production could offer immediate direction while virus new will keep the driver’s seat. Forecasts suggest trade negative prints for Japanese yen, which in turn strengthens the call for BOJ’s additional stimulus. However, the risk-tone is vulnerable due to the disease and that might help the safe-haven currency.

Technical analysis

Monday’s Doji signals the reversal of the previous u-turn from the monthly high surrounding 111.75. However, a sustained run-up beyond 109.80 becomes necessary for the pair to ignore calls of visiting 107.00 levels.


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