USD/JPY awaits a firm direction to extend recent gains above 107.00

USD/JPY seesaws around 107.30 at the start of Tuesday’s Asian session. In doing so, the yen pair takes rounds to Monday’s high following the recent recovery that defied the previous three days’ losses. With the coronavirus (COVID-19) and Sino-American headlines continue to offer background music to the markets, recent updates joined pre-earning cautious sentiment to justify the risk-off mood. However, the latest news concerning the vaccine and Hong Kong dollar peg could question the pair bulls.

Uncertainty compresses market moves…

Fears of wave 2.0 of the COVID-19 outbreak and the US-China tussle continue to weigh on the market’s risk-tone despite the early-week optimism. Despite the latest CNBC update suggesting an early vaccine production, coupled with Bloomberg’s risk-positive news concerning the Hong Kong dollar peg, trading sentiment remains downbeat. The reason could be traced from over 13.00 million of global pandemic cases and the US Secretary of State Mike Pompeo’s latest comments turning down Beijing’s claims on the South China Sea. Though, US President Donald Trump tried to cover-up the issue while citing the phase one deal status and China’s buying. Even so, traders are waiting for additional clues to justify the latest shift in the mood.

Global markets earlier cheered the hopes of further stimulus but failed to defy the rising pandemic and the risk-negative headlines concerning the already frail relations between the US and China. While portraying the same, Wall Street had to trim a heavy part of its initial gains to settle with mild gains whereas the US 10-year Treasury yields eased 1.5 basis points (bps) to 0.618% by the end of Monday’s session.

Recently, the CNBC relied on US health officials to suggest an early cure of the deadly virus while Bloomberg mentioned that the Trump administration members are dropping the previous idea of undermining the Hong Kong Dollar. While both the news is risk-positive, markets are waiting for clarifications to recall the risk-on mood.

Other than the risk catalysts, Japan’s May month Industrial Production, expected to match the preliminary readings of -25.9%, will precede the US Consumer Price Index (CPI), forecast +0.6% versus +0.1% prior, to offer fresh directions.

Technical analysis

A five-week-old descending trend line, currently around 107.35, restricts the USD/JPY pair’s immediate upside ahead of a 50-day SMA level of 107.45. Alternatively, 21-day SMA near 107.20 offers immediate support to the quote.