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Under pressure around 107.00 as COVID-19 fears join Fed shock rate cut

  • USD/JPY remains on the back foot near five-month low.
  • Fed’s emergency rate cut, coronavirus fears dragged US treasury yields towards the south.
  • Markets anticipate larger economic implications of coronavirus.

USD/JPY extends the Fed-led fall towards 107.00 amid the initial hours Wednesday morning in Asia. The yen pair dropped to the fresh yearly low the previous day after the US Federal Reserve announced 50 basis points (bps) of a surprise rate cut. The downpour got additional support from the coronavirus (COVID-19) outbreak ex-China.

If not G7, then central bankers…

The much-hyped G7 conference call failed to provide any meaningful signal of what the global financial leaders are planning to ward off the economic implications of COVID-19. However, the Federal Reserve opened the trump card with a 0.50% rate cut. Following that, the US President also pushed for a higher amount of coronavirus emergency funding bill to $8.5 billion.

Given the Fed’s big move following RBA’s nearly surprise rate cut of 0.25%, not to forget being the first shock move since 2008, investors are now concerned that the policymakers know something they don’t about the COVID-19 economic side effects.

It should also be noted that the numbers of the pandemic from the US and the rest of the world have been staggering off-late, which in turn increases risk-off.

On a different note, Japanese policymakers seem to refrain from any special moves as the BOJ Governor as well as PM Shinzo Abe failed to provide any direct measures during their appearances on Tuesday.

While portraying the trading sentiment, the US 10-year treasury yields drop to the fresh record low of 1.0% whereas the US equities also flashed red by the end of their Tuesday trading session.

Moving on, Japan’s Jibun Bank Services PMI for February, forecast 46.7 versus 51 prior, can offer the immediate direction ahead of the US data. Though, odds of a surprise move due to coronavirus headlines and/or global policymakers’ actions, if any, can’t be ruled out.

Technical Analysis

The bears are now gearing for October 2019 low near 106.50 unless the pair manages to stay positive above multiple lows marked during early December 2019 around 108.50.

 

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