USD/JPY extends rebound and prints fresh daily highs above 107.70
The USD/JPY pair broke to the upside after moving sideways for hours during 107.05 and 107.30. It climbed to 107.82, hitting a fresh daily high as the US dollar strengthened across the board.
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The rangebound mood in USD/JPY appears unchanged at least in the very near-term. Occasional bullish attempts should meet a solid barrier at the 108.30 zone, where sits the 200-day SMA; on the opposite side, May’s low in the 106.00 neighbourhood is expected to hold the downside for the time being. Furthermore, the broader risk appetite trends (coronavirus, re-opening of the economy, US-China trade) plus domestic issues (BoJ’s easing, economic recession) are predicted to keep driving the sentiment around the pair for the time being.
In addition, and despite the spread of the COVID-19 looks somewhat subsided, its impact of the global economy are far from abated. This is, at the same time, kind of limiting the selling pressure on the yen and leaves the upside in the cross limited by the 200-day SMA in the 108.30 region (the upper end of the prevailing consolidative theme).
Concerns about worsening US-China relations benefitted the Japanese yen's safe-haven status and turned out to be one of the key factors exerting pressure on the USD/JPY pair.
China’s parliament on Thursday endorsed a national security law for Hong Kong and raised fears about a further escalation in diplomatic tensions between the world's two largest economies. This, in turn, weighed on investors' sentiment, which overshadowed the recent optimism over a potential COVID-19 vaccine and hopes of a sharp V-shaped recovery for the global economy.
On the other hand, the bearish pressure surrounding the US dollar remained unabated, instead was further fueled by a fresh leg down in the US Treasury bond yields. This, in turn, inspired bearish traders and contributed to the USD/JPY pair's offered tone through the Asian session.
The pair dropped to its lowest level since May 18, though the downside remained limited, at least for the time being. Investors now seemed reluctant to place any aggressive bets, rather preferred to wait for the US President Donald Trump's news conference regarding China's move to tighten control over the city of Hong Kong.
In the meantime, traders are likely to take cues from Friday's US economic docket – featuring the release of Core PCE Price Index, Personal Income/Spending data, Goods Trade Balance figures and will be followed by Chicago PMI and revised Michigan Consumer Sentiment Index.