USD/JPY: Advancing virus cases to bring back risk-aversion trade to the greenback
|USD/JPY rises to 107.66, up 0.14% on a day, as the rising Covid cases could prompt a general return to the dollar-centric safety trade if the infection escapes its current bounds, outweighing signs of a reviving US economy, FXStreet’s analyst Joseph Trevisani reports.
Key quotes
“Risk appreciation puts the dollar is the odd position of losing ground as the US economy improves and gaining adherents when the Covid situation worsens.”
“Uncertainty over the course of the pandemic and the economic response is the main reason for the modest revival of risk-aversion. The three states are the center of the current outbreak, California, Texas and Florida are the three most populous in the US and if they were forced to move to strict business shutdowns it would effectively stop the economic recovery.”
“Until there is a resolution of the fundamental risk picture the technical qualities of the USD/JPY will continue to circumscribe trading. That said, there is a bias higher in the USD/JPY because the Covid caseload is the determinant and it is rising.”
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