USD/JPY holds onto recovery gains towards 108.00, trade sentiment stays heavy

Following its pullback from 107.80 in the last hour, USD/JPY rises to 107.70 amid the pre-Tokyo open Asian session on Tuesday. In doing so, the pair struggles to justify the safe-haven status of the US dollar and the Japanese yen.

The US dollar registered broad gain on Monday as the early-day risk-off, mainly due to the coronavirus (COVID-19) updates from the US, gained momentum backed by the oil’s slump.

Oil dropped into the negative territory (for May contract) for the first time in history as traders fear coronavirus will weigh on demand amid increasing supplies and a lack of storage capacity. The moves could also be attributed to the month-end lack of liquidity for the May month contrary that will be closed on Tuesday.

The US death toll crossed 40,000 at the start of the week but US President Donald Trump keeps pushing for the phased economic re-start. In his latest taskforce briefings, President Trump signaled that the New York Governor, who is opposing to ease the lockdown restrictions, will visit the White House on Tuesday.

Amid all the risk-off, the US 10-year Treasury yields dropped four basis points to 0.61% whereas Wall Street also marked losses by the end of their Monday’s session.

It’s worth mentioning that the pair might also have taken clues from the receding trade balance from Japan, to ¥4.9 B from ¥917.2 B expected and ¥1108.8 B prior.

Given the lack of major data from either Japan or the US during Asia, traders will keep following the virus updates for fresh impetus. Also likely to affect the market sentiment, as well as the pair, will be the oil price momentum.

Technical analysis

Unless declining below the monthly low surrounding 106.90, USD/JPY can keep aiming for a 21-day SMA level of 108.40.