USD/JPY snaps three-day downtrend towards regaining 109.00 as Tokyo open welcomes risk-on mood

USD/JPY refreshes intraday high with 108.78, stay on the front foot, as markets in Tokyo open for Monday. In doing so, the risk-barometer portrays the traders’ upbeat mood after Friday’s US data back the extension of easy money policies. Also on the positive side could be the latest updates concerning the coronavirus (COVID-19), Iran and vaccinations.

Risk-on it is…

The disappointment over Friday’s US monthly jobs report favored equity buyers and dragged down the US dollar index (DXY) the previous day. However, receding challenges to the US Federal Reserve’s (Fed) easy money policies triggered market optimism, which in turn propels USD/JPY, afterward.

It should be noted that the European Union (EU) ability to sign a major vaccine deal with the Pfizer-BioNTEch as well as Iran’s no dumping of the nuclear talks with the US, surprisingly, add to the latest risk-on mood.

Alternatively, Brexit jitters and political uncertainty in the UK, as well as the covid woes in Japan, test the bulls. “Japan's confirmed daily coronavirus infections topped 6,000 for the third straight day on Sunday, while the number of patients with severe symptoms rose to a record 1,144, amid the spread of more contagious variants,” said Kyodo News.

Amid these plays, US 10-year Treasury yields regain 1.60% level, up 2.1 basis points (bps), whereas S&P 500 Futures gain 0.26% while Nikkei 225 marks a 0.92% intraday gain by the press time.

Looking forward, Japan’s covid concerns may join a light calendar to dent the USD/JPY upside towards 109.00. However, market optimism seems to back the bulls, for now.

Technical analysis

Despite bouncing off a 50-day EMA level near 108.40, USD/JPY buyers need to close beyond the immediate hurdle around 108.85, comprising 21-day SMA, to convince the markets.