USD/JPY dwindles below 107.00 as risk aversion dominates in Asia
- USD/JPY looks for a firm direction around 106.85.
- Buyers and sellers jostle over the safe-haven allures of the USD and the JPY.
- Trade, virus and geopolitical tensions are all in play at the week’s start.
- No fresh data/events from Japan but risk catalysts to remain in the driver’s seat.
USD/JPY fades the pullback from 106.77 while stepping back from 106.88, currently around 106.85, amid the pre-Tokyo Asian session on Monday. The yen struggles for a clear move as traders seemed to be confused over the risk-safe natures of the respective currencies amid broad risk-off mood.
Fears of wave 2.0, Sino-American tension in the spotlight…
With the recent surge in the US coronavirus (COVID-19) figures, Florida marked an increase of 3.7% in cases versus a previous seven-day average of 3.5%, fears of the pandemic’s return loom over the market’s trading sentiment. Not only the US, Beijing, Japan, Germany and some parts of Asia are also flashing the red signals and propel the risks-aversion wave.
On a different note, the US and Chinese tussle are getting bitter with Beijing’s recent cancellation of American meat from Tyson, citing virus fears. Also, US Secretary of State Mike Pompeo’s discussion with allies over steps on the Asian major offers an extra burden on the trade-negative mood. Even so, the Axios cite US President Donald Trump saying to step back from sanctions on Chinese diplomats over the Xinjiang issue to safeguard the trade deal. Additionally, attacks in London and tension between the North and the South of Korea add strength to the risk-off sentiment.
Against this backdrop, the S&P 500 Futures drop 0.40% to 3,045. It should also be noted that the other risk catalysts, namely US 10-year Treasury yields and Wall Street benchmarks flashed negative signals on Friday.
Looking forward, the qualitative factors contributing to the risks will be in the spotlight amid a lack of major data/events concerning the pair in Asia. Among them, the virus updates and the US-China headlines will be the key to watch.
Technical analysis
Unless slipping back below an ascending trend line from May 06, at 106.70 now, sellers might refrain to challenge the monthly low near 106.55, needless to mention dreaming of the May month low close to 106.00. On the contrary, buyers might take fresh positions on the upside break above June 16 peak surrounding 107.65.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
