USD/JPY: Under pressure testing 107.20 support

USD/JPY opened down in Asia as the risk rally undermines the safe haven of the US dollar, continuing the theme from Wall Street.

The US dollar fell against all G10 currencies on the day. USD/JPY slipped a modest 20 pips net to 107.30.

At the time of writing, USD/JPY is trading at 107.22 between a tight range of 107.31 and 107.22.

The JPY has also been weakened on the crosses as the safe havens were sold off on global economic recovery hopes. Markets are mixed which likely leave the pair in familiar ranges on a light calendar for the day ahead. 

We have supports at 107.04-12, 106.85-90 and resistances at 107.55-60, 107.75-80, 107.95-108.00.

Wall Street managed to stage a come back after the prior sessions slump on coronavirus spread concerns.

However, the mood was more upbeat mid-week. 

Investors continued with the economic recovery playbook, looking past the record numbers of new cases in the US and putting them down to higher levels of testing. 

European equities closed lower but the US rallied late. More on this here: Wall Street Close: Bulls take back the baton, shrug-off 3 million US COVID-19 cases

US cases of COVID-19 surpassed three million 

It was another hard up day for the United States which saw its highest daily total of COVID-19 cases with 60,000 new cases recorded and more than 3 million total on the Johns Hopkins University COVID-19 tracker. The previous record was more than 50,000 cases, which was set last week.

The country now has 3,035,231 COVID-19 cases, including 132,041 deaths.

This rise in cases began at the end of May, following the reopening of most states' local economies. Florida, Texas, and Arizona are harbouring some of the largest outbreaks.

The optimism, despite record numbers of new cases, came in Dr Fauci saying that a Phase 3 vaccine trials may begin at the end of July. Investors picked dup on his cautious optimism for a vaccine by year-end.

The Fed’s Bostic reiterated that the infections spikes are clouding the reopening outlook, but a broad shutdown isn’t expected.

Looking ahead, we have another low-key day ahead with global data releases restricted to just the China June CPI and PPI in Asia today and then US weekly jobless claims in NY.

Analysts at Westpac explained that "the downward trend in initial jobless claims is expected to extend, with consensus for 1427k initial claims in the week to 4 July, versus 1375k in the prior week. Wholesale inventories are likely to remain volatile in the months ahead given global uncertainty (prior and May market f/c: -1.2%)."

USD/JPY levels