USD/JPY consolidates losses but bears keep the baton amid coronavirus fears

  • USD/JPY bears catch a breath after a three-day losing streak.
  • Fears of coronavirus spreading fast outside China, mainly in Europe, propel the risk aversion.
  • The US dollar weakness also weighs on the pair.
  • An absence of major data will add importance to the coronavirus headlines.

USD/JPY consolidates losses to 110.20 amid the initial Asian session on Wednesday. That said, the pair portrayed the broad risk-off, led-by coronavirus fears, while declining for the third day in a row during the previous day.

Broad risk-off supersedes fears of Japan’s economic slowdown…

With the coronavirus (COVID-19) spreading fast outside China, mainly in European countries like Spain, Italy, Switzerland and Croatia, market players continue to extend risk aversion. In doing so, they pay a little heed to the fears of the Japanese recession unearthed sometime ago with the Q4 GDP growth numbers.

“Japan remains under significant economic pressure and a recession may be imminent. Despite this, we think the mix of BoP inflows provides the JPY with a significant tailwind — particularly if risk appetite diminishes further. We continue to look for further JPY appreciation against risk-sensitive currencies that are highly leveraged to slowing global growth — the SEK in particular,” said TD securities.

Given the risk aversion, the US 10-year treasury yields drop heavily and revisited the multi-year low of 1.32%, bouncing back to 1.37% by the press time. Further, Wall Street benchmarks registered another day of broad declines, around 3.0% each, as their trading time ends for Tuesday.

Also contributing to the pair’s weakness could be the US dollar weakness against the majority of its counterparts. The reason could be traced from the mixed US data as well as doubts on the Federal Reserve’s bullish bias amid the current risk-off period that dents US bond yields and stocks. Even so, the latest comments from the Fed policymakers, like Vice Chair Clarida, tried to placate traders.

Moving on, an absence of major data/events on the Japanese economic calendar will keep investors searching coronavirus updates for fresh impulse.

Technical Analysis

FXStreet’s Valeria Bednarik cites the risk of the USD/JPY pair’s extended slump:

The USD/JPY pair is down for a third consecutive day, and at risk of extending its slump. The 4-hour chart shows that the pair is below its 100 SMA for the first time since early February, while the 20 SMA turned sharply lower over 100 pips above the current level. Technical indicators maintain their bearish slopes near oversold readings. An extension below the 110.00 level favors a downward continuation toward 109.65, where the pair bottomed on February 18.

Support levels: 109.65 109.30 108.90

Resistance levels: 110.35 110.60 110.95

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD extends sideways grind around 1.1650 after mixed US data

EUR/USD is struggling to find direction on Thursday and continues to fluctuate in a relatively tight range around mid-1.1600s. Mixed data releases from the US don't seem to be having a noticeable impact on the greenback's performance against its major rivals.


GBP/USD struggles to pull away from 1.3800

GBP/USD retraced a portion of Wednesday's during the European trading hours pressured by the renewed USD strength and the souring market mood. With the latest US data failing to trigger a reaction, the pair stays in a consolidation phase near 1.3800.


XAU/USD struggles for direction, flat-lined above $1,780 level

The risk-off impulse in the markets extended some support to the safe-haven gold. Elevated US bond yields, a modest USD strength capped the upside for the metal. Bulls need to wait for a move beyond the $1,800 mark before placing fresh bets.

Gold News

Buying Solana now to gain 700% profits by 2022

Solana price has been on a massive run-up in 2021 from $1 to $216 in roughly eight months. This stellar climb is likely to continue into 2022 as significant bullish signs emerge. Moreover, the start of a new bull run will serve as a tailwind for SOL.

Read more

Netflix: Three reasons to sell NFLX after earnings

NFLX has been strong into earnings as investors digested the massive success of Squid Game and hoped this would feed through into very strong subscriber numbers. Netflix was out straight after the bell with earnings.

Read more