USD/JPY eyes 108.00 as Tuesday’s recovery moves gains momentum

• USD/JPY extends the latest pullback from 107.50 following mixed data from Japan.
• Japanese Current Account balance strengthened, Trade Balance recovered in May but June month Bank Lending eased.
• The fresh risk aversion wave, backed by the virus woes, US-China tension, favor the US dollar recovery.
• Japan’s Nishimura suggests urgent coronavirus countermeasures, BOJ marks hike in deposits and CDs.

USD/JPY ticks up to 107.65 amid the initial hour of Tokyo trading on Wednesday. In doing so, the yen pair stretches the previous day’s recovery moves from a one-week low of 107.25. While broad risk aversion should have helped the Japanese yen, a surge in the coronavirus (COVID-19) cases in Tokyo joins downbeat economics from the Asian major, in contrast to the US, while pleasing the bulls.

Japan’s May month Trade Balance marked a reduction in the previous ¥-966.5 B deficit with ¥-556.8 B figures. Additionally, the Current Account balance also surged past-¥1088.2 B forecast to ¥1176.8 B in May but Bank Lending for June slipped below 7.2% expected to 6.2% YoY.

The deadly disease’s resurgence takes a toll on the global risk sentiment. The US crossed three million mark for the new cases whereas Tokyo flashed a sustained above 100 numbers for over the sixth day in a row. Further, Australia’s Melbourne and surrounding cities witness another lockdown whereas figures from Beijing buck the trend with another zero-day.

While identifying the criticality of the conditions, Japanese Economy Minister Yasutoshi Nishimura said to need coronavirus countermeasures urgently. On the other hand, the Bank of Japan (BOJ) cites the record 6.2% hike in June month bank deposits as well as a surge in the Certificate of Deposits (CDs) to mark the investors’ rush in the safe-haven currency.

All these catalysts dimmed the recent surge in the global equities, including Wall Street, while Japan’s Nikkei 225 declining 0.40% to 22,525. Further, the US 10-year Treasury yields also seesaw around a multi-week low of 0.65% after slipping 4.4 basis points (bps) the previous day.

Other than the virus woes, global tussles with China also add to the market’s pessimism. Recently, US Secretary of State Mike Pompeo joined other White House advisers to undermine the Hong Kong dollar’s peg with the greenback to punish the dragon nation. Earlier during the day, the US diplomat spoke for visa restrictions on Chinese policymakers over Tibet issue. Furthermore, Australia has also raised alarms for citizens visting China while the UK and India are also at loggerheads with Beijing off-late.

Looking forward, Japan’s Eco Watchers’ Survey for June and the US Consumer Credit Change for May could offer intermediate trade signals. However, major attention will be given to the risk factors for near-term direction.

Technical analysis

The 100-day SMA level of 107.80 becomes immediate upside barrier ahead of 108.00 threshold and 108.40 resistance comprising 200-day SMA. Meanwhile, the pair’s declines below 21-day SMA level of 107.25 could recall sellers targeting a sub-107.00 area.