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USD/JPY clings to gains near 200-DMA, around mid-108.00s

  • USD/JPY regains positive traction and was being supported by a combination of factors.
  • The USD built on the overnight gains and was supported by a pickup in the US bond yields.
  • Improving global risk sentiment weighed on the safe-haven JPY and remained supportive.

The USD/JPY pair maintained its strong bid tone through the early European session and is currently placed near the top end of its daily trading range, around mid-108.00s.

Following the previous day's two-way/directionless price action, the pair caught some fresh bids on Tuesday and was being supported by a combination of positive factors. The safe-haven Japanese yen was weighed down by a further recovery in the global risk sentiment, which coupled with some follow-through US dollar buying remained supportive of the uptick.

Against the backdrop of the Fed's unlimited QE and a massive $2.2 trillion US economic stimulus package, a sharp rebound in Chinese manufacturing activity boosted investors' confidence and the same was evident from a positive mood around the equity markets. In fact, the official Chinese Manufacturing PMI for March surpassed even the most optimistic estimates and jumped back in the expansion territory.

The risk-on mood was further reinforced by a goodish pickup in the US Treasury bond yields, which assisted the greenback to build on the overnight gains. This provided an additional boost to the pair's recovery move from near two-week lows set in the previous session. It will now be interesting to see if the pair is able to capitalize on the uptick or continues with its struggle to sustain above the very important 200-day SMA.

Moving ahead, market participants now look forward to the US economic docket – featuring the release of Chicago PMI and Conference Board's Consumer Confidence index – in order to grab some short-term trading opportunities. The key focus, however, will remain on developments surrounding the coronavirus saga.

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