USD/JPY: Bulls attack 109.00 even as sluggish markets confront downbeat sentiment

USD/JPY remains mildly bid around 109.00 amid the initial hour of Friday’s Tokyo open. In doing so, the yen pair keeps the previous day’s upside momentum despite struggling over mixed data and risk catalysts.

Starting with the Japanese economics, Tokyo Consumer Price Index (CPI) drops below -0.2% forecast and previous readouts to -0.6% in April whereas Tokyo CPI ex Food, Energy arrived as 0.0% versus 0.3% expected and prior. It should, however, be noted that Jibun Bank Manufacturing PMI for April grew past 53.3 market consensus and earlier prints to 53.6. Also on the positive side were Japan’s Unemployment Rate and Industrial Production readings for March.

Market sentiment sounds downbeat as S&P 500 Futures and Nikkei 225 print mild losses while the US 10-year Treasury yield keeps the previous day’s upside momentum.

While tracing the dull mood in the market, fears of Indian-origin covid strain and vaccine updates join mixed moves by China and chatters over reflation could be spotted as the main catalysts. Additionally, the worsening virus conditions in Japan are also contributing to the downside sentiment.

Although the risk-off mood should have ideally put a bid under the Japanese yen, the US dollar index (DXY) seems to benefit from the same amid recently upbeat US data and hopes of further stimulus from US President Joe Biden.

Looking forward, China’s official activity numbers for April will offer immediate direction to the USD/JPY traders amid expectations of soft outcomes. Following that, risk catalyst may try to keep the markets alive ahead of the US session where second-tier data relating to income-spending, activity and housing will offer fresh impulse.

Technical analysis

Not only a clear break of monthly resistance line, now support around 107.55, but sustained trading beyond the key SMAs also favor USD/JPY buyers to aim for mid-March high near 109.30.